August 24, 2026, 21:27 GMT | Comment
Third-party litigation funders have suffered setbacks in a disclosure fight that includes patent disputes, with the USITC considering new requirements alongside action by states, Congress and a federal rules committee. Insurers and corporate groups portray nonrecourse funding as opaque and costly, while funders say the campaign could disproportionately affect smaller patent owners that rely on outside capital to enforce their rights.
Third-party litigation funders are losing ground to corporate lobbies in a dispute over who must reveal the money behind US lawsuits, and which forms of outside financing can remain beyond public scrutiny.
At least 24 states have regulated some aspect of third-party litigation funding, or TPLF, according to the
American Property Casualty Insurance Association. North Carolina in June became the first state to ban most commercial forms of the practice, while last month Ohio enacted registration and post-resolution disclosure requirements and New Hampshire enacted restrictions on funding involving foreign adversaries.
The
US International Trade Commission is considering requiring funding disclosures in investigations carried out under Section 337 of the Tariff Act of 1930 (see
here). In Washington, the proposed Litigation Funding Transparency Act of 2026, S. 3826, would mandate disclosure in certain proceedings through federal legislation (see
here).
Separately, the
US Chamber of Commerce and
Lawyers for Civil Justice have asked the federal judiciary's Advisory Committee on Civil Rules to amend Rule 26. Their March proposal would require parties at the outset of a case to identify nonparty funders and produce funding agreements and related documents. The committee is studying the issue.
Together, the efforts reflect growing momentum behind arguments by insurers, large companies and their lobbying organizations that say TPLF is opaque and contributes to frivolous claims, outsized verdicts and foreign influence.
But these organizations are not disinterested observers. Groups on both sides have financial interests at stake. APCIA represents insurers that pay liability claims, while the Chamber speaks for companies that are frequent litigation defendants in expensive patent cases. Conversely, the TPLF industry has a financial interest in fighting restrictions.
The disclosure issue centers around a dispute over why nonrecourse litigation funding should be subject to requirements that do not apply to other forms of outside capital used to finance litigation.
TPLF providers advance money against a legal claim and receive nothing if the case fails, an arrangement known as nonrecourse funding. The APCIA and the US Chamber have not sought comparable disclosure requirements for ordinary bank loans, equity financing, insurance and some donor-backed litigation — forms of outside capital that generally are more available to large companies.
"The type of funding that I do tends to support smaller businesses that need [financing] for fees and costs," William Marra, director of
Certum Group and leader of its litigation-finance strategy, told MLex. "If you are a large company, you probably don't need third-party litigation finance for the fees and costs of litigation. You might raise equity or general recourse debt capital."
— Normal people —
Funders are not charities. They invest in litigation to make money and generally seek claims large enough to justify the risk.
"Litigation finance is the capital markets come to law," Marra said, adding that his firm and its peers fund fewer than 5 percent of the cases they review. Funders argue that nevertheless it is one of the few sources of capital available to an individual or small business facing a far larger opponent.
"Most people, myself included, could never afford to go against
Google or
Monsanto or whoever the accused bad actor is," said Erick Robinson, a partner and patent litigator at
Cherry Johnson Siegmund James. "Whether it's patents, whether it's toxic torts, whatever, us normal people have no shot."
The access-to-justice argument comes as insurers and corporations successfully push for greater scrutiny of litigation finance.
"TPLF remains largely opaque," Stephen Waguespack, president of the Chamber's Institute for Legal Reform, told MLex.
Outside financiers can secretly influence litigation strategy, prolong cases and inflate settlements, Waguespack said, adding that foreign governments could use funded litigation to burden American companies and obtain sensitive information.
"There's just no evidence [of foreign influence] in the third-party funding space," Marra said. "If it is a significant threat, then we should have a regulation that addresses foreign influence and litigation in all of its forms" and not just nonrecourse lending.
Certum's "funding agreements expressly disclaim control" over litigation strategy, he said.
— Potential costs —
Research from the Institute for Legal Reform estimates that the US tort system cost $529 billion in 2022, equal to 2.1 percent of gross domestic product and $4,207 per household, Waguespack said. The figures measure the entire tort system, however, rather than costs attributable specifically to litigation funding.
A December 2025 Perryman Group report attributed $35.8 billion in annual direct losses to TPLF and, after applying economic multipliers, estimated annual losses of $54.2 billion in gross product and about 454,450 jobs. It put the combined cost of lost earnings and inflation at $607.27 per household.
Those figures are modeled estimates, not observed changes following the introduction of litigation funding. Perryman based its estimates partly on a 2022 tort-cost study sponsored by the US Chamber's institute and industry research that assumes funding generates additional litigation costs.
"Their methodology is highly contested," Marra said of the Chamber's data.
The APCIA has celebrated the states' response and applauded North Carolina's ban as protection against "predatory commercial third-party funders."
Litigated personal injury claims from car accidents lasted 9.6 times longer and incurred costs 361 percent higher than unfunded claims, APCIA spokesman Jon Ward said, citing a Sedgwick report from June. He also pointed to an
Ernst & Young estimate that TPLF could add as much as $50 billion to insurance costs over five years, creating a 4 percent to 5.2 percent drag on annual loss ratios.
Neither report establishes definitively that TPLF is the reason for the cost increases because expensive, complex or slow-moving cases may be more likely to attract outside funding in the first place.
— Not evil —
"Fighting for transparency in litigation funding is an effort by insurers to reduce costs for consumers," Ward told MLex. "Lawsuit abuse drives up the cost of doing business for insurers, but also for businesses across the economy."
Robinson said insurers' economic interest helps explain their opposition to TPLF.
Insurance companies "say that [TPLF] adds to prices, nuclear verdicts, prolonged litigation because [the plaintiff] can actually stay in it, as opposed to being forced to settle for $1," Robinson said. "This is not about fairness. This is about profit, and about making sure that people that have been aggrieved, either patent owners or people that have been harmed by drugs — whatever it is — don't get their day in court.”
Marra, who has written a law-review paper challenging the Rule 26 proposal, argues that any court-made disclosure rule should cover every form of outside financing.
"This is not about disclosure," Marra said. "If you want to genuinely have a third-party litigation funding disclosure rule, then disclose all forms of third-party funding. Don't just disclose the type of nonrecourse litigation funding seeking money damages that is disproportionately used by poor individuals and small businesses."
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