The Transparency Tide: What the Wave of U.S. Disclosure Legislation Means for Funders

It has been a busy fortnight in U.S. litigation finance regulation, and the direction of travel could not be clearer.

At the state level, Michigan's House passed its Third-Party Litigation Funding Transparency Act on May 12th, introducing registration and disclosure requirements for funders and additional restrictions on funding terms. Meanwhile, New York's Consumer Litigation Funding Act is scheduled to take effect in mid-June. At the federal level, Senator Grassley's Litigation Funding Transparency Act of 2026 — co-sponsored by Senators Tillis, Kennedy and Cornyn — has been introduced and referred to the Senate Judiciary Committee. Separately, the Advisory Committee on Civil Rules of the Judicial Conference of the United States has continued moving forward with potential federal disclosure rules for third-party litigation funding arrangements. Even the U.S. International Trade Commission has proposed what would be the first agency-level disclosure requirement for funded patent disputes.

The patchwork is becoming a pattern. For funders operating across multiple jurisdictions, the compliance picture is becoming more complex. States vary significantly in what they require: some mandate automatic disclosure of funding agreements; others bring them within the scope of discovery; some regulate pricing and contractual terms; and a growing number focus on foreign ownership or control. And federal legislation or judicial rules, if enacted, would add a separate disclosure regime to cases filed in federal court.

What does this mean in practice? Greater transparency is likely to reinforce the broader institutionalization of the litigation finance market. Clearer disclosure requirements can raise operational standards, encourage more consistent documentation, and provide funded parties and their counsel with better-defined frameworks for structuring compliant arrangements. For established funders with robust governance and disciplined underwriting processes, these developments may be manageable, even if they increase administrative burdens.

Erso Capital views these developments as part of the market's continued maturation. Thoughtfully designed disclosure rules can help address concerns around conflicts, ownership, and control while promoting greater confidence among courts and counterparties. At the same time, it will be important for policymakers to ensure that transparency requirements remain proportionate and focused on identifiable risks, so that regulation enhances rather than unnecessarily complicates access to litigation funding and, ultimately, access to justice.