Donald J. Trump entered the White House as the most legally burdened president in U.S. history. According to USA Today, Trump faced at least 75 open lawsuits when he took office, with the expectation that the number would only rise, given issues like unpaid campaign vendors and potential defamation claims.
While it’s hard to predict exactly how Trump’s presidency would affect the legal funding industry, key trends during his administration suggest a range of possible impacts. Here are ten factors to consider for legal funders.
1. Market Reactions: Unpredictable Outcomes
When Trump was elected, many predicted a market crash that would linger, but the opposite happened. After a brief dip, the markets rebounded strongly, driven by expectations of less financial regulation and increased infrastructure spending. Bank stocks, in particular, soared, anticipating rollbacks on regulations such as Dodd-Frank.
The same unpredictability applied to Trump’s campaign promise to block the AT&T-Time Warner merger. Although the stock dropped initially, it later rebounded after Trump’s transition team hinted the deal might proceed. Legal funders, like the market, had to stay flexible and prepared for sudden changes in regulatory and business environments (New York Times).
2. Trump’s History with Litigation
Trump’s extensive legal history is well-known—over 1,900 lawsuits as a plaintiff and more than 1,450 as a defendant. His frequent legal disputes, whether it was suing neighbors over landscaping at his Miami golf club or engaging in high-profile real estate cases, show that he views litigation as a useful tool rather than a nuisance (Curbed Miami). For legal funders, this suggests that Trump’s administration may have a heightened awareness of the legal system’s power, which could work in favor of the litigation finance industry.
3. The Influence of Peter Thiel
Peter Thiel, a billionaire and co-founder of PayPal, gained attention for backing Hulk Hogan’s lawsuit against Gawker. He also became a major supporter of Trump’s campaign, donating $1.25 million and joining Trump’s transition team (CNN). Thiel’s knowledge of legal funding and his influence in the administration meant that funders had a key ally who understood the benefits and power of litigation finance.
4. The Push for Deregulation
During his campaign, Trump promised to slash regulations by up to 70%. While this figure was likely exaggerated, his administration did reduce oversight across federal agencies, including the CFPB, SEC, and FCC (Washington Post). For legal funders, deregulation could create new opportunities by loosening restrictions on financial products and services, but it also meant adjusting to a new regulatory landscape where state governments might play a bigger role.
5. Shift of Regulation to States
If federal oversight continues to shrink, state governments may take on more responsibility for regulating financial products, including legal funding. This shift could mean a more complex operating environment for legal funders, with different regulations across states. However, it also buys legal funders time to make their case that overly restrictive regulation could harm consumer choice and access to justice (Forbes).
6. Fewer Regulations = More Lawsuits
With fewer federal regulations in place, more companies might push the legal limits, leading to an increase in consumer lawsuits. Without strong oversight to prevent corporate misconduct, more consumers may turn to the courts, and legal funding could become a critical resource for plaintiffs seeking justice. The rise in litigation could be a boost for the legal funding industry, which thrives when consumers need financial help to pursue claims (Washington Post).
7. The Impact of a Republican-Controlled Government
Although Republicans generally advocate for less regulation, the legal funding industry found itself in a unique situation. Big businesses, especially insurance companies, sometimes favor regulation when it protects their interests, such as limiting legal funding to preserve their market dominance. Legal funders may face pressure from unexpected sources, as some Republican-aligned entities push for regulation that curtails legal funding (Chamber of Commerce).
8. Conservative Judges and Tort Reform
Trump’s promise to appoint conservative judges, along with Republican control of federal and state governments, could accelerate tort reform. Insurance companies, which lobby heavily for tort reform, aim to limit payouts in lawsuits, making it harder for plaintiffs to secure large settlements. This could negatively impact the legal funding industry by reducing the number of cases funders are willing to finance (Politico).
9. Repealing the Affordable Care Act (ACA)
Trump’s efforts to repeal the ACA could leave millions of Americans uninsured, leading to more complicated legal claims when accidents or medical issues arise. While this creates challenges for individuals, it also presents opportunities for legal funders to offer financial assistance in cases where plaintiffs can no longer rely on insurance to cover medical expenses (Time).
10. Mike Pence’s Support for Legal Funding
Mike Pence, as governor of Indiana, signed a law in 2016 that regulated legal funding, setting rate caps and excluding legal funding from being classified as a loan. While the law had its critics, it was less restrictive than similar measures in other states. Pence’s involvement provided a degree of stability for the industry during his vice presidency, ensuring legal funding wasn’t overly restricted at the federal level.
Conclusion: The Unpredictable Trump Factor
Donald Trump’s presidency brought uncertainty to many industries, including legal funding. His litigious background and deregulation agenda created a mixed bag of opportunities and challenges for funders. Although it’s hard to predict the long-term impact, one thing is clear: Trump’s time in office has reshaped the legal and regulatory landscape in ways that will affect the legal funding industry for years to come.
