Optimizing the Litigation Funding Ecosystem

Litigation finance has become increasingly prevalent in the United States, yet its regulation remains fragmented and contested. This Article challenges the conventional wisdom that uniform federal regulation is the solution to the issues posed by litigation funding. Instead, it argues that targeted improvements to the existing legal ecosystem can enhance predictability and fairness without requiring sweeping regulatory overhaul.

     This Article makes three key contributions. First, it provides a comprehensive analysis of the growth and maturation of the U.S. litigation finance industry over the last decade and a half, distinguishing between commercial and consumer financing. Second, it explains why regulatory fragmentation persists, situating debates over litigation funding within the broader context of procedural advantage in civil litigation. The Article demonstrates that state-level policy variation reflects legitimate differences in judicial resources, economic conditions, and views about access to justice.

     Finally, the Article identifies two concrete improvements that courts and practitioners can implement using existing legal frameworks: first, courts should treat litigation funders as agents who facilitate legal representation, bringing them within the established doctrine of attorney-client privilege; and second, parties can achieve greater certainty in priority rights by taking advantage of the UCC’s existing Article 9 framework for secured transactions, thereby reducing uncertainty and decreasing dispute-related costs. These targeted enhancements can significantly improve the functioning of litigation finance while preserving state policy choices about regulation.