New York Sues Arbitration Platform Rapid Ruling Over Alleged Rigging for MCA Lenders

No single MCA story broke in the past 24 hours, but the industry's regulatory squeeze kept tightening this summer, and the details are worth a closer look. Here's where things stand.

New York Sues "Sham" Arbitration Platform Over MCA Collections

On June 8, 2026, New York Attorney General Letitia James sued Rapid Ruling, an online arbitration platform, along with its founders Zachary Meyer and Andrew Sachs. The lawsuit alleges Rapid Ruling presented itself as a neutral arbitration forum while it was actually created in coordination with a merchant cash advance company, which helped write arbitration rules that favored MCA funders in disputes with small businesses.

According to the Attorney General's office, its investigation found that 97 percent of the roughly 3,000 arbitrations Rapid Ruling administered in its first three years took place without any appearance by the small business on the other side — meaning funders routinely won default-style rulings against merchants who had no real chance to contest the claims against them. The suit seeks restitution for affected businesses, damages, civil penalties, and a court order barring Rapid Ruling, Sachs, and Meyer from continuing the practice.

It follows New York's $1.065 billion settlement with Yellowstone Capital, one of the largest enforcement actions ever brought against the MCA industry, and signals that the state intends to keep targeting not just funders but the collection infrastructure — arbitration providers, confession-of-judgment filings, and similar mechanisms — that funders rely on to enforce advances.

SBA Refinancing Ban and Senate Pressure Add to the Squeeze

Separately, small business advocates in Congress are pushing back on a 2025 Small Business Administration policy that bars merchants from using SBA 7(a) loans to refinance out of merchant cash advance or factoring debt. In a letter released in mid-May, Senators Ed Markey and Ron Wyden argued that tariff-driven cost pressure has pushed more small businesses into MCAs — which they say carry effective annual rates averaging around 94 percent — while the SBA's refinancing exclusion leaves those same businesses with no government-backed off-ramp. The senators asked the SBA to explain its reasoning for the exclusion and to consider revisiting it, along with providing clearer consumer education about MCA risk.

Taken together with the Rapid Ruling suit, the pattern is consistent: regulators and lawmakers are treating MCA collection and refinancing practices as a systemic problem rather than a series of isolated bad actors.

Bankruptcy Courts Keep Recording the Fallout

The downstream effect shows up in bankruptcy filings. Data compiled by Bloomberg Law shows cases listing merchant cash advance debt surged starting in 2023 and peaked in 2025 at more than 230 filings, with MCA funders increasingly listed among the largest creditors in small-business Chapter 11 cases. Attorneys who work MCA defense cases point to "stacking" — taking on additional advances to cover payments on existing ones — as a key driver, noting that businesses with multiple stacked MCAs default at substantially higher rates than those with a single advance.

What It Means

None of this changes the immediate math for a merchant already holding an MCA, but it does show the legal and political ground continuing to shift beneath the industry. Arbitration and confession-of-judgment mechanisms that funders have long relied on to enforce advances quickly are now themselves targets of state enforcement, while federal lawmakers are questioning whether existing SBA policy pushes cash-strapped businesses toward MCAs in the first place. For merchants currently evaluating an advance or already stacked into several, that combination — tighter collection oversight plus continued scrutiny of alternatives like SBA refinancing — is likely to keep shaping both new deal terms and how existing disputes get resolved.