States Move to Regulate Third-Party Litigation Funding

Over 20 states have enacted disclosure laws amid a push for greater transparency in lawsuit financing.

Updated on Oct. 20, 2026 in Law

States Move to Regulate Third-Party Litigation Funding

Live Poll

Should third-party entities be required to disclose their funding of U.S. lawsuits?

More than 20 states have implemented laws regulating third-party litigation funding to clarify who finances lawsuits and how money influences legal outcomes. These measures come as federal officials consider a national standard for disclosure to address systemic concerns.

Why it matters

Lawmakers are acting to curb legal system abuse, aiming to reduce insurance costs and provide transparency regarding foreign-entity involvement in litigation. Stakeholders argue that undisclosed funding sources can unfairly influence the trajectory and resolution of civil cases.

North Carolina now imposes penalties of $50,000 per violation for prohibited litigation investment. Meanwhile, Florida insurance defense costs dropped to 1.9% of premiums in 2025, down from 8.4% in 2022.

The players

U.S. Chamber Institute for Legal Reform

This organization advocates for civil justice reform and has petitioned for a uniform litigation disclosure standard.

Federal Civil Rules Advisory Committee

This body oversees the rules of civil procedure and is currently reviewing potential standards for litigation funding disclosure.

The details

States like Ohio, Mississippi, Tennessee, and Utah now require funder registration or disclosure, while the Western District of Louisiana introduced a standing disclosure order in September 2026. These regulations often focus on restricting foreign funding and limiting the control third-party entities exert over litigation strategy.

Florida insurer defense costs reached 8.4% of premiums in 2022.
Nuclear verdicts totaled $25.6 billion across 190 cases in 2025.
The Litigation Funding Transparency Act was introduced in Congress in February 2026.
Florida property insurance rate changes averaged -1.7% through June 30, 2026.
The Western District of Louisiana instituted a standing disclosure order in September 2026.

Political Context

Legislators backing these mandates frequently cite the Litigation Funding Transparency Act to justify a national push for disclosure. Opponents, including some legal investment firms, argue that such regulations could restrict access to justice by limiting the resources available to plaintiffs.

These regulations may ultimately influence insurance premiums and the speed at which civil cases are resolved in your state. While the laws target professional funders, they aim to create a more transparent legal environment that could reduce the volatility of insurance costs for homeowners and businesses.

The takeaway

Transparency in legal financing is becoming a major legislative priority as states attempt to manage the impacts of high-value nuclear verdicts. Readers involved in civil suits may soon encounter new disclosure requirements that mandate the identification of third-party funders.