Most litigation funding agreements are deliberately structured as a purchase of a contingent interest in the proceeds of a claim, not as a loan. This is not just semantics: because the capital is non-recourse and repayment is contingent on a successful outcome, funders and claimants generally avoid characterizing the arrangement as lending, which would trigger usury laws, banking regulation, and a very different tax treatment in many jurisdictions.
Courts and regulators have not always agreed on where the line sits. Some funding structures use fixed multiples or capped returns that look economically similar to interest, and litigants on the losing end of a funded dispute have occasionally argued that a given arrangement was really a disguised loan subject to usury caps. So far, courts in most major litigation finance markets, including the U.S. cases addressing the question, have generally upheld the non-recourse, proceeds-purchase characterization where the agreement is genuinely contingent on outcome.
The distinction also shapes ethics analysis: because a true non-recourse funding arrangement is not a loan to the client, the attorney is not considered to be assisting a client in borrowing against the outcome of litigation in the way historic maintenance and champerty doctrines were designed to prevent, part of why courts like the one in Miller v. Caterpillar were willing to treat funding as a legitimate, non-officious commercial arrangement.