Champerty in Kentucky and Indiana: An Old Doctrine With Modern Teeth

Champerty is one of those words that sounds like it belongs in a dusty English law book, and in a sense it does. But do not mistake age for irrelevance. Champerty is alive, it still has teeth in parts of the United States, and in Kentucky it is one of the most important legal realities any litigation funder must reckon with. Understanding it — and understanding how Kentucky and Indiana handle it very differently — is essential to understanding how White Oak Litigation Finance operates and why we are as careful as we are.

What Champerty Actually Means Champerty is a centuries-old doctrine, inherited from English common law, that prohibits an outside party from funding someone else’s lawsuit in exchange for a share of the proceeds. Its close cousin, maintenance, refers more broadly to a stranger meddling in or supporting litigation they have no legitimate interest in. The doctrines were born from a medieval fear: that powerful outsiders would stir up, fund, and profit from lawsuits, using the courts as a weapon and a speculative investment rather than a means of doing justice.

For most of American history these doctrines have been eroding. The clear national trend, as courts have repeatedly observed, is toward limiting or abandoning champerty prohibitions — especially for commercial litigation funding between sophisticated parties. Today, commercial litigation funding is legal and enforceable in the great majority of states. But “most” is not “all,”

and the exceptions matter enormously depending on where you are. Kentucky is one of the notable exceptions.

Kentucky: A Serious Champerty State Kentucky has a statute on the books — KRS 372.060 — that voids champertous contracts. The statute renders void any agreement made in consideration of services rendered in prosecuting or defending a lawsuit where the funder acquires an interest in the thing being sued over. That is broad language, and Kentucky courts have taken it seriously.

The most important modern signal came in the federal case Boling v. Prospect Funding Holdings. Kentucky’s own highest court had not squarely decided whether litigation funding agreements violate the champerty statute, so the federal courts had to predict what it would do.

Their prediction was unfavorable to funders: applying Kentucky law, the courts concluded that the funding agreements at issue were champertous, contrary to Kentucky public policy, and therefore void. They pointed to several features — that the funder acquired an interest tied to the outcome of the case, and that the agreements gave the funder substantial control over the litigation, including terms discouraging the plaintiff from changing counsel.

The court went further. It rejected the argument that calling the arrangement a “non-recourse investment” rather than a loan saved it, and it found the arrangement ran afoul of Kentucky’s usury restrictions as well — in part because the agreement spoke in terms of interest rates. In other words, Kentucky courts looked past the label to the substance, and the substance did not survive.

In Kentucky, a funding agreement that hands the funder control, or that behaves like an interest-bearing loan, is at serious risk of being declared void. The label on the document does not save it — the substance decides.

The lesson for anyone operating in Kentucky is unmistakable. Champerty here is not a historical footnote. It is a live doctrine that has voided real agreements, and the two features most likely to sink a deal are funder control over the litigation and structure that looks like a disguised, interest-bearing loan.

Indiana: A Different, More Regulatory Approach Indiana comes at the same underlying concerns from a very different direction. Rather than wielding an old champerty doctrine to strike down funding agreements, Indiana has moved toward regulating litigation funding by statute — and it has focused that regulation specifically on consumer litigation funding.

Indiana law, enacted in recent years, requires that when a consumer claimant enters a litigation funding contract, that fact must be disclosed to other parties and to insurers with a duty to defend, and the existence and contents of the funding contract become subject to discovery. Just as importantly, Indiana statute prohibits a funding provider from making any decision, exerting any influence, or directing the claimant or attorney with respect to the conduct of the case or any settlement. The right to make those decisions is reserved by law to the claimant and the attorney. Indiana, in other words, has written the control line directly into its code.

Crucially, Indiana’s statutory regime is aimed at consumer claimants. It does not, by its terms, reach commercial claimants, law firms, or parties using funding to defend against claims. So while Indiana imposes clear rules — transparency and a firm prohibition on funder control — it does so through a modern regulatory framework focused on consumers, rather than by resurrecting champerty to void commercial deals the way Kentucky’s doctrine threatens to.

Two States, Two Philosophies Put side by side, the contrast is instructive. Kentucky relies on an old common-law and statutory doctrine — champerty, reinforced by usury law — to police funding, and its courts have shown a genuine willingness to void agreements that cross the lines. Indiana relies on modern, targeted statutes that emphasize disclosure and a strict prohibition on funder control, concentrated on the consumer side of the market. Kentucky is the more restrictive and less predictable environment for funders; Indiana is more regulated but, for commercial disputes, more navigable.

For a funder operating across both states, this means one size cannot fit all. An arrangement must be structured with the specific state’s law in mind — both the state where the litigation is pending and the state whose law governs the funding contract. What passes muster in one may be fatal in the other.

How White Oak Litigation Finance Stays Out of the Fray Our response to this landscape is not to avoid it but to master it. We operate in Kentucky and Indiana with our eyes open, and we structure every arrangement to stay well clear of the tripwires the law has laid down.

• Genuine non-recourse structure. We insist on true non-recourse arrangements, where repayment depends on the case outcome and nothing else — the opposite of the disguised, interest-bearing loan that Kentucky courts have condemned.

• No funder control, ever. Because funder control over litigation is the single feature most likely to void a deal, we build every arrangement so that all decisions — strategy, settlement, choice of counsel — remain firmly with the client and their attorney. This is also exactly what Indiana statute demands.

• Focus on commercial real estate and contract disputes. By concentrating on commercial disputes between sophisticated parties rather than consumer or personal injury cases, we operate in the part of the field where the law is most settled and the risk of a challenge is lowest.

• State-specific structuring. We treat Kentucky and Indiana as the distinct legal environments they are, structuring each arrangement with the governing law squarely in mind rather than applying a generic template.

• Careful language, not just careful intent. Because Kentucky courts have looked at how agreements are worded — treating interest-rate language as a red flag — we are deliberate about structuring and describing our arrangements as the risk investments they genuinely are, measured by return on capital rather than interest.

Going the Distance for Clients and Attorneys Getting champerty right is not just about protecting ourselves. It is about protecting the clients and attorneys who rely on us. A funding arrangement that gets voided is a catastrophe for everyone involved — the claimant, the lawyer, and the funder alike. By going the distance on structure, on diligence, and on respecting the legal lines, we give our clients funding they can actually count on and attorneys an arrangement that will not blow up their case. That is what it means to help people while avoiding the legal pitfalls: do the hard work up front so the arrangement holds when it counts.

The Bottom Line Champerty is old, but in Kentucky it is far from dead — it has voided real agreements and remains a serious constraint, reinforced by usury law and a judicial willingness to look past labels to substance. Indiana handles the same concerns through modern, consumer-focused regulation that prizes transparency and prohibits funder control. The two states demand two different approaches, and a funder who ignores the difference is asking for trouble. White Oak Litigation Finance stays out of the fray by understanding both regimes deeply and structuring every arrangement to honor them — protecting our clients, our attorneys, and the integrity of the funding itself.

SOURCES & FURTHER READING 1. Ky. Rev. Stat. § 372.060 — Champertous contracts and conveyances void, https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=35270 2. Boling v. Prospect Funding Holdings, LLC (6th Cir. 2019) — opinion, https://www.opn.ca6.uscourts.gov/opinions.pdf/19a0210n-06.pdf 3. Sixth Circuit upholds Kentucky champerty and usury bar on litigation funding — Drug & Device Law, https://www.dru ganddevicelawblog.com/2019/05/sixth-circuit-upholds-ruling-that-kentucky-champerty-and-usury-laws-bar-litigation- funding.html 4. Proposed amendments to Indiana’s third-party litigation funding law — Indiana Law Review, https://mckinneylaw.iu.edu/practice/law-reviews/ilr/pdf/vol58p189.pdf 5. Litigation Funding 2025 — Chambers Global Practice Guides (national trend), https://practiceguides.chambers.com/practice-guides/comparison/1199/15428/24217-24224-24228-24232 Disclaimer: This article is provided by White Oak Litigation Finance for general educational purposes only and is not legal, financial, tax, or investment advice. It does not create any attorney–client or advisory relationship. Litigation funding is subject to state-specific law (including champerty, maintenance, and usury doctrines) that varies and evolves; outcomes and returns are never guaranteed. Consult qualified legal and financial professionals before making decisions.