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A Manhattan bankruptcy judge ruled that a law firm's merchant cash advances were disguised loans, while New York's Attorney General sued an arbitration platform accused of rigging outcomes for MCA funders — two of the developments driving sharper legal scrutiny of the industry in 2026.
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There's no single blockbuster headline out of the merchant cash advance world in the last day, but the last several weeks have added up to a meaningful shift: courts and regulators in New York keep chipping away at the legal protections MCA funders have historically relied on.
Here's a roundup of the developments worth tracking.
Bankruptcy Judge Rules Kossoff PLLC's Merchant Cash Advances Were "Disguised Loans" Judge David S.
Jones of the U.S.
Bankruptcy Court for the Southern District of New York ruled that 19 merchant cash advance agreements between Capital Stack LLC and the collapsed real estate law firm Kossoff PLLC, totaling nearly $10.9 million, were "well drafted attempts to characterize high-return financing as asset sales" rather than genuine purchases of receivables.
The July 27 partial judgment could let the firm's bankruptcy trustee claw back roughly $8.7 million in pre-bankruptcy payments, though the exact recovery amount is still to be decided.
It's one of the more detailed judicial opinions yet applying "disguised loan" reasoning to a stack of MCA agreements, and funders should expect it to be cited in future recharacterization fights.
(Bloomberg Law) NY Attorney General Sues Arbitration Platform Over Alleged MCA Collusion Attorney General Letitia James sued Rapid Ruling, an online arbitration platform, along with founders Zachary Meyer and Andrew Sachs, alleging the service was created in coordination with an MCA company that helped write its arbitration rules to favor funders while presenting itself publicly as a neutral forum.