Litigation funding (TPLF)

GAO's December 2022 report describes the arrangement and its two markets¹.

• Commercial funding is arranged between funders and corporate litigants or law firms. A funder may agree to provide funding for legal or business expenses in exchange for a portion of the court award if the plaintiff wins. The funding is typically in the millions of dollars¹.
• Consumer funding is arranged between a funder and an individual, such as the plaintiff in a personal injury case. The amount is relatively small, typically under $10,000, and is used for living expenses¹.
• Who funds the funders. Litigation funders are typically private firms that obtain investment capital from a variety of investors, such as endowments and pensions¹.
• Repayment. Plaintiffs that win their cases will generally repay the funder the amount received plus an additional amount based on a return structure in the funding agreement¹.

According to the literature GAO reviewed, third-party litigation financing has been well established for decades in some countries, such as Australia and England, and gained a foothold in the US around 2010¹.

GAO reports the points below as views from the literature it reviewed and from the funders and stakeholders it interviewed¹. They are reported views, not findings that apply to every case.

GAO reported in December 2022 that the third-party litigation financing industry is not specifically regulated under US federal law, although some states regulate consumer funding, for example by limiting the fees funders can charge¹. It also reported that there is no nationwide requirement to disclose litigation funding agreements to courts or opposing parties in federal litigation, although courts have required disclosures of funding arrangements in some instances¹.

At the federal rulemaking level, the Civil Rules Advisory Committee's minutes of 24 October 2025 record that its TPLF subcommittee continued to gather the information needed to arrive at a recommendation on whether a rule requiring disclosure of TPLF would be salutary². The same minutes say the subcommittee had learned that TPLF works very differently, and presents different potential costs and benefits, in different kinds of litigation, including cases involving intellectual property². No nationwide rule has been adopted. In May 2026 the Civil Rules Advisory Committee reported that its TPLF subcommittee was continuing its work, with the current focus on a possible disclosure requirement in Rule 26(a)(1), or a mention of TPLF in the case-management provisions of Rule 16 or 16.1⁵. At the subcommittee's request, the Federal Judicial Center is studying the experience in the District of New Jersey⁵.

Individual courts have adopted their own disclosure rules^3,4. The two below are taken from the courts' own websites. Each applies only in the court that adopted it, and the Delaware order only in cases assigned to the judge it names.

Both instruments let parties seek further discovery of the funding arrangement on a showing. Under the New Jersey rule, the showing is good cause that the non-party has authority to make material litigation or settlement decisions, that the interests of the parties or class are not being promoted or protected, that conflicts of interest exist, or that other disclosure is necessary to an issue in the case³. The Delaware order lists similar grounds, or other good cause⁴.