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House rejects bill to regulate third‑party litigation financing after heated debate
Summary
The South Dakota House voted down Senate Bill 175, a proposal to regulate third‑party litigation financing, after lawmakers split over consumer protection and potential impacts on access to justice.
The South Dakota House of Representatives voted down Senate Bill 175 on March 5, 2025, a measure that would have required disclosure and licensing for third‑party litigation financiers and limited certain financing terms.
Proponents said the bill would bring transparency to an expanding industry that can influence litigation strategy. Representative Roby, the bill—s floor sponsor, described third‑party litigation financing as "a growing and concerning trend in our judicial system" and said the measure would make financiers— agreements discoverable and require licensure with the Division of Banking.
Opponents, including Representative Hughes and Representative Mortensen, urged rejection. Hughes said there was an "irreconcilable contradiction between section 7 and section 14," arguing the joint and several liability in section 14 would make financiers jointly liable for awards or sanctions and could chill lenders from offering funds to impecunious plaintiffs. Mortensen warned the provision could effectively end litigation financing and thereby harm claimants who lack resources to pursue meritorious cases.
During floor debate members also raised practical concerns about whether the bill would unduly restrict traditional loans or banking products; Roby said the bill excludes traditional bank loans and ordinary lawyer advances so long as they are not contingent on the litigation outcome.
The final roll call showed 30 ayes and 40 nays; the measure failed to receive a majority and was declared lost.
Members who spoke at length emphasized competing priorities: transparency and consumer protections versus ensuring injured parties retain access to financing that can enable meritorious claims. The transcript records substantive legal and policy questions that sponsors said could be refined in future drafts.
With the vote, lawmakers left the existing legal framework in place and signaled that further work would be needed before a consensus regulation could be adopted.
