The lack of regulation surrounding third-party litigation funding (TPLF) creates a significant legal loophole that could allow hedge funds, foreign investors and sovereign wealth funds to profit from U.S. lawsuits, delay justice and increase costs for taxpayers. What seems to be an obvious problem to fix has recently drawn scrutiny from “consumer” groups that argue for no regulation or transparency. Allowing predatory litigation funders to go unchecked will only hurt, not help, the U.S. taxpayers.

In less than 20 years, TPLF has grown into a $15 billion investment industry. Investors are often hedge funds or other money management firms looking to profit from a settlement or court award. TPLF investors are not “local” groups posing a threat; foreign actors using the TPLF may pose a national security threat

These adversaries benefit from funding U.S. lawsuits, which enables them to gain access to business trade secrets through our courts and manipulate the market in ways that harm American innovation and competitiveness. This system comes at a cost for consumers, contributing to the soaring “tort tax” that all Americans pay. The 2025 “tort tax” is in excess of $1,600 annually per person, higher than in prior years. If lawmakers don’t get TPLF under control and properly regulated, America’s “tort tax” will continue to increase.

We hope that law firms voluntarily disclose outside involvement in their cases. Without mandatory disclosure requirements, there’s no way for judges, juries or defendants to know who’s behind a lawsuit, what their financial interests are, or whether a foreign entity is influencing the litigation for profit or political leverage.

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