The One Big Beautiful Bill giveth, and the One Big Beautiful Bill taketh away.
Amid the sausage-making negotiations between the U.S. House and Senate to develop a final bill to send to President Donald Trump, several legislative initiatives — like tort reform, limiting state regulation of AI, and fixing the PBM (pharmacy benefit manager) system — were left on the cutting-room floor.
Now efforts are underway to bring some of those proposals back in the months ahead.
Some proposals, like a 10-year moratorium on state-level AI regulation that was part of the House-passed version, were cut due to a lack of support in the Senate.
Others, like a GOP-led effort to crack down on third-party litigation financing (TPLF), ran afoul of the Senate parliamentarian, who plays a key role in reconciliation legislation like the Big Beautiful Bill.
TPLF, a multibillion-dollar global industry, allows outside investors — often hedge funds or foreign entities — to bankroll lawsuits in exchange for a share of the winnings. Proponents say it can help under-resourced plaintiffs stand up to deep-pocketed corporations. Critics argue it fuels frivolous lawsuits, delays settlements, and, under current tax rules, lets foreign investors reap untaxed profits at the expense of American businesses and consumers.
The reform that was added — then removed — from the Senate version of the Big Beautiful Bill would have ended the favorable tax treatment given to TPLF profits, which are currently treated as capital gains. As Americans for Tax Reform notes, the actual defendants — the ones who’ve been harmed — have to pay ordinary tax rates on any award they get from the litigation.
“Thus, TPLF funders pay a lower tax rate on their portion of a court award than actual plaintiffs, while foreign TPLF ‘investors’ can leverage this tax treatment to avoid any U.S. tax obligation from using the U.S. court system to target U.S. companies with lawsuits,” ATR reports.
U.S. Rep. Kevin Hern (R-Okla.), who, along with U.S. Sen. Thom Tillis (R-N.C.), has proposed legislation to address the issue, says a major opportunity was lost.
“We missed a critical chance in the One Big Beautiful Bill to pass the Tackling Predatory Litigation Funding Act, which would tax litigation profits from third-party funders at ordinary income rates. Without this reform, foreign adversaries and investors exploit our courts, harming American businesses and consumers. I hope to see Congress prioritize this issue in the next reconciliation package.”
Supporters are hopeful the TPLF reform can make it through the GOP-controlled Congress.
The moratorium on state regulation of AI systems or models, on the other hand, appears to be facing a steep uphill climb. Opposition is coming from across the political spectrum, from Rep. Marjorie Taylor Greene (R-Ga.) on the MAGA right to U.S. Sen. Ed Markey (D-Mass.) on the progressive left.
“With their blanket 10-year ban on state AI regulation, Republicans are choosing a sledgehammer over the scalpel,” Markey said.
Supporters say the U.S. needs a single level of regulation for the tech industry or risk losing ground to China.
Opponents call legislation blocking state regulation of AI an “AI amnesty” for “trillion-dollar Big Tech monopolists.”
Rep. Ro Khanna (D-Calif.), who represents Silicon Valley in Congress and is widely believed to be considering a 2028 run for president, said that if the moratorium becomes law, “States would not be able to stop AI from denying health insurance or firing employees or protect kids from addictive algorithms.”
Meanwhile, hopes for a major shakeup of the prescription drug supply chain fizzled when the Senate stripped PBM reforms from the Big Beautiful Bill, leaving one of the most heavily lobbied corners of the health care system untouched.
The House-passed version included provisions that would have ended so-called “spread pricing” and barred PBMs from tying their compensation to the list prices of drugs. Supporters argued the measures were modest but meaningful first steps toward curbing the middlemen’s influence and driving down prescription costs.
But when the bill reached the Senate, those sections were quietly dropped. The final measure, signed into law on July 4, contained no PBM reforms at all.
Of the three issues, Capitol Hill insiders say the TPLF reform is most likely to make it through Congress before the 2026 midterms.
