Rules governing class action litigation funding in the United States are being written in real time, and as of 2026 they form a patchwork rather than a system. No uniform federal rule requires plaintiffs to disclose that a third party is bankrolling their case, seven states have enacted funding statutes of varying strictness, North Carolina has moved to ban the practice outright, and several congressional bills are pending. Overseas, the UK and Australia are also rewriting their frameworks. What follows is where each of those rules stands and what they would require.
Federal Disclosure: The Proposed Rule 26 Amendment
Federal courts do not currently require litigants to disclose outside funders. Individual judges may order it, but most do not; roughly 40 percent of motions seeking disclosure are granted and 60 percent denied.1U.S. Courts. Suggestion From LCJ and ILR on Rule 26
In March 2026, the U.S. Chamber of Commerce’s Institute for Legal Reform and Lawyers for Civil Justice jointly proposed amending Federal Rule of Civil Procedure 26(a)(1)(A) to require automatic disclosure, at the start of every case, of any nonparty funder with a financial interest and the underlying funding agreement.2Institute for Legal Reform. Uniform Rule for TPLF Disclosure The proposal is modeled on the existing rule requiring disclosure of insurance agreements.
The Advisory Committee on Civil Rules has been studying the question since forming a dedicated subcommittee in October 2024. At its October 2025 meeting, the committee agreed to keep studying whether a rule is needed but did not issue a formal proposal.3Dechert LLP. Advisory Committee Advances Litigation Funding Review The subcommittee is weighing how to define covered arrangements, what to disclose, whether the requirement should apply universally or only in certain case types, and how to handle foreign actors. The International Legal Finance Association opposes mandatory disclosure, arguing that funders do not control litigation strategy.1U.S. Courts. Suggestion From LCJ and ILR on Rule 26
Pending Federal Legislation
Several bills would set funding rules by statute rather than by court rule:
- The Litigation Funding Transparency Act of 2026 (S. 3826), introduced in February 2026 by Senators Grassley, Tillis, Kennedy, and Cornyn, would require disclosure of funding agreements and prohibit funders from controlling litigation decisions in federal class actions and multidistrict litigation.4GovInfo. S. 3826 – Litigation Funding Transparency Act
- The Protecting Our Courts from Foreign Manipulation Act (H.R. 2675) would bar sovereign wealth funds and foreign governments from funding U.S. lawsuits and require other foreign investors to disclose their roles. The House Judiciary Committee recommended it on a 15-11 vote in November 2025.5Bloomberg Law. Foreign Investments in US Lawsuits Targeted by US House Panel
- The Litigation Transparency Act (H.R. 1109) would require funding disclosure in all federal civil litigation.
- The Tackling Predatory Litigation Funding Act (S. 1821), introduced by Senator Tillis in May 2025, takes a tax approach: it would tax third-party funders’ litigation proceeds at the highest individual rate plus 3.8 percentage points and require 50-percent withholding on payments to funders.6Congress.gov. S.1821 – Tackling Predatory Litigation Funding Act
State Laws Currently in Force
As of mid-2025, seven states had enacted litigation funding statutes: Indiana, Kansas, Louisiana, Montana, Oklahoma, West Virginia, and Wisconsin. Their reach varies widely. Montana’s law is among the strictest, with automatic disclosure requirements, caps on the percentage of recovery a funder may take, and prohibitions on funders providing legal advice or making key case decisions. Oklahoma and Wisconsin do less, simply specifying that funding arrangements fall within the scope of discovery.7Washington Legal Foundation. Beneath the Surface: A Deeper Dive Into Third-Party Litigation Funding
North Carolina’s Outright Ban
The most sweeping state action came from North Carolina. House Bill 315, titled the Prohibit Litigation Investments Act, passed the state Senate 45-1 on June 9, 2026, and cleared the House 112-0 the following day.8North Carolina General Assembly. House Bill 315 The bill was presented to Democratic Governor Josh Stein on June 12, 2026, and as of that date was awaiting his signature.9Bloomberg Law. Litigation Finance Ban Legislation Advances in North Carolina If signed, North Carolina would become the first state to broadly ban third-party investment in civil lawsuits.
The bill defines a “litigation investment” as providing money for legal proceedings in exchange for a return contingent on the outcome. It carves out standard contingency fee arrangements, insurer obligations, and certain nonprofit or family financial support.10BillTrack50. NC H315 Bill Detail
Other State Bills in Play
Several states are considering new statutes. Rhode Island’s Third-Party Litigation Financing Consumer Protection Act (S 2494), introduced in February 2026, would require funders to register with the state, post a $50,000 surety bond, and automatically disclose funding contracts to all parties.11Rhode Island General Assembly. S 2494 Bill Text South Carolina’s H. 4521, the Transparency in Consumer Legal Funding Act, would impose disclosure and registration requirements and mandate that funding agreements be non-recourse.12South Carolina Legislature. H. 4521 California’s AB 2305, introduced by Assemblymember Kalra, would prohibit private equity firms, hedge funds, and other corporate investors from directing or influencing litigation strategy in funded cases.13Consumer Attorneys of California. CAOC Legislation Page Florida’s SB 1396, which would have required disclosure of any foreign involvement and prohibited funders from directing litigation, died on the Senate calendar in March 2026 without reaching a floor vote.14Florida Senate. SB 1396 Bill Page
Foreign Funding Restrictions
Foreign money in U.S. lawsuits is a distinct regulatory concern. The U.S. Chamber has argued that adversarial governments could use funding arrangements to access sensitive information, evade sanctions, or undermine U.S. interests, citing cases such as Chinese firm PurpleVine IP financing patent lawsuits against Samsung.15U.S. Chamber of Commerce. Setting the Record Straight on Third-Party Litigation Funding
Fortress Investment Group is a focal point. Fortress has committed $2.9 billion to patent litigation and is majority-owned by Abu Dhabi’s Mubadala Capital, a sovereign wealth fund; it withdrew a $4 billion patent case against Intel after a Delaware court ordered it to disclose its funding arrangements.16Patent Progress. New Reporting Shines Light on Litigation Funding Giant H.R. 2675 would require funders with sovereign-wealth-fund backing to restructure ownership or exit the U.S. market.5Bloomberg Law. Foreign Investments in US Lawsuits Targeted by US House Panel
Limits on Funder Control From Courts and Bar Opinions
Even without a uniform disclosure rule, courts and bar associations have set limits on how much control a funder may exert over a case. The clearest illustration is the fight between Sysco Corporation and Burford Capital in the federal pork and beef antitrust litigation in Minnesota. Burford provided roughly $140 million to finance Sysco’s claims. When Sysco moved to settle with certain defendants, Burford blocked the deals as too low. Sysco and Burford eventually agreed to transfer Sysco’s claims to a Burford-created shell company called Carina Ventures. A federal magistrate judge rejected the maneuver in February 2024, writing that “it is difficult to conceive of any stipulation more against public policy than a contract term requiring the litigation financier’s permission to settle the underlying litigation.”17Institute for Legal Reform. In Re Pork Antitrust Litigation Court Opinion The district judge affirmed, holding that the arrangement “threatens the public policy favoring the settlement of lawsuits.”18Bloomberg Law. Judge’s Order Deals Blow to Sysco, Burford Capital in Pork Suits
Bar associations have drawn similar lines. The New York City Bar’s Professional Ethics Committee issued Formal Opinion 2024-2 warning that lawyers cannot sign funding agreements requiring them to follow a funder’s instructions over their client’s wishes and that sharing confidential materials with funders risks waiving attorney-client privilege.19New York City Bar Association. Formal Opinion 2024-2: Ethical Issues Arising From Litigation Funding Agreements The California State Bar reached similar conclusions in its 2020 formal opinion, emphasizing that a lawyer’s primary duty remains to the client and that any pre-existing relationship with a funder must be disclosed as a material fact.20State Bar of California. Formal Opinion No. 2020-204: Litigation Funding
UK Rules: The PACCAR Fix and the Merricks Cap
UK rules matter for U.S. plaintiffs and funders operating cross-border, and they are changing. In July 2023, the UK Supreme Court ruled in PACCAR Inc v Competition Appeal Tribunal that funding agreements pegged to a percentage of damages are generally unenforceable unless they comply with damages-based agreement regulations, casting doubt on many existing agreements.21Dechert LLP. UK Government to Legislate on Litigation Funding to Mitigate PACCAR In December 2025, Justice Minister Sarah Sackman announced that the government would legislate to clarify that funding agreements are not damages-based agreements and would impose “proportionate regulation” on the sector, moving away from voluntary self-regulation.22UK Parliament Hansard. Third-Party Litigation Funding Debate The legislation is expected to take effect prospectively once parliamentary time allows.
A June 2026 ruling in Merricks v Mastercard capped funder returns in a class action context. The case settled for £200 million on behalf of roughly 44 million UK cardholders. Funder Innsworth Capital sought a total return of £179 million; the Competition Appeal Tribunal capped its profit at 50 percent of its expenditure, limiting the total payout to about £68 million. The High Court upheld the cap on judicial review, finding the tribunal acted within its “wide powers” and emphasizing that the collective proceedings regime exists for class members, not “lawyers and funders.”23ICLG. Victory for Merricks as Funder Loses Mastercard Settlement Challenge
Australia’s Framework
Australia was one of the earliest jurisdictions to accept litigation funding, with the High Court holding in 2006 that third-party funding is not an abuse of process. In December 2025, the Australian Securities and Investments Commission extended litigation funding exemptions from financial-product regulations until January 2029.24Chambers and Partners. Litigation Funding 2026: Australia Trends and Developments
Two recent High Court decisions shape the class action side. In Kain v R&B Investments, the court confirmed that common fund orders requiring all class members to contribute to a funder’s commission are permissible at settlement or judgment. At the same time, the court ruled that contingency-style fees for lawyers are prohibited under the Legal Profession Uniform Law everywhere except Victoria.25Ashurst. Current Trends in Australian Disputes 2025-26 Under Victoria’s Group Costs Order regime, the median fee rate is 24.5 percent of the recovery.24Chambers and Partners. Litigation Funding 2026: Australia Trends and Developments
What to Watch Next
The Advisory Committee on Civil Rules is expected to revisit federal disclosure at its next meeting, and the four pending congressional bills remain live. Governor Stein’s decision on North Carolina’s HB 315 will determine whether the country has its first outright state ban. The UK government has promised PACCAR-fix legislation that has yet to be introduced. Until those pieces land, the answer to “what rules apply” depends on the court, the state, and in some cases the nationality of the money behind the case.