Another U.S. Litigation Funding Bill Stalls in Congress, Policy Questions Remain.

This week, Congress once again failed to advance proposed federal legislation aimed at regulating litigation funding in the United States. A bill focused on disclosure of third-party funding arrangements was considered by the House Judiciary Committee, but discussions concluded without a vote, leaving the proposal effectively paused for the time being.

From the perspective of the litigation funding industry, the repeated stalling of these measures reflects an unresolved policy dilemma rather than a lack of interest. Lawmakers are increasingly aware of the growing role litigation funding plays in the civil justice system, yet there remains significant disagreement over how regulation should be structured and how far it should go.

There is broad acceptance that transparency has a role to play, particularly in cases where large pools of capital originate from overseas or where funding may intersect with strategic, political, or public interest considerations. Courts and policymakers have a legitimate interest in understanding whether external actors could exert influence over sensitive litigation, especially in areas of national interest. Carefully targeted disclosure requirements designed to address those risks are not inherently controversial.

The concern for many funders arises when legislative proposals fail to draw clear distinctions between targeted transparency and sweeping disclosure obligations. Overly broad regimes risk increasing costs, delaying proceedings, and discouraging funding for claimants who depend on third-party capital to pursue valid claims against well-resourced opponents. In that context, regulations intended to protect the justice system may instead limit access to it.

The fact that similar bills have struggled to gain traction suggests Congress has yet to identify a framework that commands sufficient confidence across stakeholders. There appears to be scepticism that current proposals strike the right balance between protecting the integrity of the courts and preserving the practical benefits that litigation funding provides.

For now, litigation funding in the U.S. remains governed by a combination of state law, procedural rules, and judicial discretion. While this fragmented approach is imperfect, it arguably allows greater flexibility than a federal regime that is not yet fully aligned with how the market actually operates.

As litigation funding continues to mature, the push for transparency is unlikely to fade. The challenge for lawmakers will be to craft regulations that address genuine systemic risks without undermining a financing tool that, when used responsibly, supports access to justice and the efficient resolution of disputes.