Policy Hub / Third-Party Litigation Funding
Third-party
litigation funding
Somebody is paying for the lawsuit, and it usually isn't the person whose name is on it. Hedge funds and sovereign wealth vehicles buy a piece of a case, take their cut off the top, and never appear in the courtroom. Here's what every state has done about it — and what Texas hasn't.
18
States with a law on the books
3
States with a bill still moving
8
States where a bill was filed and killed
0
Texas rules on litigation funding
What litigation funding is
Third-party litigation funding is an outside investor putting money into somebody else's lawsuit in exchange for a share of whatever the case produces. The investor is not a party, is not the lawyer, and in most states never has to be identified. Hedge funds, private equity vehicles and sovereign wealth arms all do it, and the industry now has its own trade association.
The fight is over whether the court and the parties get to know a lawsuit is financed from the outside — and whether a foreign government or foreign investor should be allowed to hold a financial stake in litigation against an American company at all.
The Funding — how it works
Thirty seconds on who pays for a lawsuit, who stands to profit, and why the funding should be on the record.
Why Texans pay for it
Third-party litigation funding is not free money. It is an investment, and the people providing it expect a return. Funders are often foreign — sovereign wealth funds, offshore vehicles and state-backed investors — and they do not put capital to work for public-spirited reasons. When a funder buys a stake in a lawsuit, a non-party acquires a financial interest in the size of the recovery. Courts and parties should know who is financing a lawsuit, who stands to profit and whether foreign interests are involved.
Lawsuit abuse makes Texas more expensive. Those costs reach families through higher insurance premiums, consumer prices and the cost of doing business. The question is not whether litigation funding exists; it is whether Texans should be forced to subsidize a business model they cannot see.
State law
What every state has done about the money.
Switch layers to see the full regulatory picture, foreign-funding restrictions, or disclosure duties. Selecting a state updates the panel in place.
Current as of September 2026
The full regulatory picture, tier by tier. Select a state to read its record.
Hover or tap any state. Texas is shown by default.
- Total ban on outside funding
- Disclosure + foreign ban
- Foreign restrictions only
- Disclosure only
- Funder control restricted
- Legislation pending
- No regulation
Selected state
Texas
No regulation
No registration. No disclosure. No foreign-funding rule. Courts and parties should know who is financing a lawsuit, who stands to profit and whether foreign interests are involved. In Texas, they do not.
Nothing on the books. Funders operate unseen.
Legislation
None
Base review: September 2026. California, Ohio, and Wisconsin updated November 2026 using the October 2026 state-law review. New Hampshire and tracker bill details reconciled November 2026 with the supplied TLR bill tracker. Sources: enacted statutes, filed legislation, and the cited review.
Texas today
None
Registration, disclosure and foreign-funding rules currently required of litigation funders in Texas.
What Texas currently requires.
Nothing in Texas law obligates a litigation funder to register with the state, identify itself to the court, or report a foreign owner. Funding agreements are not automatically discoverable. There is no cap on what a funder may take out of a recovery and no prohibition on a funder directing strategy or settlement.
That means a case tried in a Texas courtroom can be financed by an investor the court and the defendant never learn about — and, in principle, by an entity controlled from outside the country.
Model legislation
Which bill actually exposes the money?
A foreign-funding ban is only as good as the disclosure rule that enforces it. Georgia wrote the cleanest version of both. North Carolina banned the practice. Texas wrote nothing.
Foreign-government ban
Georgia
Yes. Funders tied to foreign governments cannot register.
North Carolina
Yes, by implication. All outside investment is barred.
Texas
None.
Mandatory disclosure
Georgia
Yes. Discoverable in any case over $25,000.
North Carolina
No standing duty. The ban replaces it.
Texas
None.
Covers all funders
Georgia
Yes. Domestic and foreign must register.
North Carolina
Yes. Every non-party investor.
Texas
None.
Funder control prohibited
Georgia
Yes. No directing strategy, counsel or settlement.
North Carolina
Yes. There is no funder.
Texas
None.
Recovery cap
Georgia
Funder cannot recover more than the plaintiff.
North Carolina
Not applicable.
Texas
None.
Enforcement
Georgia
Registration revoked, plus criminal penalties.
North Carolina
Contracts void, $50,000 per violation, treble damages.
Texas
Nothing to enforce.
Plaintiffs keep court access
Georgia
Yes. Funding stays legal, just visible.
North Carolina
Narrow carve-outs only.
Texas
Yes — but courts and parties learn nothing about who is financing the case.
Who is behind the money
The funders don't show up on the docket.
Burford Capital
The largest litigation funder in the world, publicly traded on the NYSE with billions committed to legal assets.
Mithaq Capital, a Saudi investment house, has held a substantial stake. Burford has also acknowledged a sovereign wealth fund arrangement.
Paulina FundingCo LLC
An outside litigation funder created in 2016 for a single $6 million deal, promising a 350% return if the litigation succeeded.
The U.S. litigation finance firm that created it has still never been publicly identified.
Case study
$6M
The maximum amount Paulina FundingCo LLC agreed to provide KIPB LLC for patent litigation.
350%
The return promised to Paulina if the litigation succeeded. On a $6 million investment, that would equal $21 million.
$203M
The judgment KIPB obtained in an East Texas patent lawsuit involving Samsung.
When lawsuit funding stays out of view.
In 2016, KIPB LLC, the company that owned the U.S. patent and brought the East Texas lawsuit, entered into a funding agreement with Paulina FundingCo LLC, an outside litigation funder. According to federal court records, Paulina agreed to provide up to $6 million for patent litigation in exchange for a 350% return if the litigation succeeded.
KIPB later obtained a $203,003,416 judgment in an East Texas patent case involving Samsung.
The Korea Advanced Institute of Science and Technology, known as KAIST, alleges that it was not consulted about the funding agreement and did not learn about it until late 2020. KAIST also alleges that millions of dollars had already been paid to Paulina by that time.
The parties later disputed who was entitled to the remaining funds and whether Paulina's claimed financial interest had priority.
Policy takeaway
The dispute illustrates the problem created when outside lawsuit funding does not have to be disclosed at the beginning of a case.
Texas courts and parties should know when an outside investor is financing litigation, who stands to profit and whether foreign interests are involved.
Domestic funding can remain legal, but it should not remain invisible. Funding by foreign governments and foreign principals should be prohibited.
What TLR is seeking.
Courts and parties should know who is financing a lawsuit, who stands to profit from it, and whether foreign interests are involved. Texas should require litigation funders to identify themselves, disclose who stands to profit, and reveal any foreign ownership or financial interest. TLR's draft goes further on foreign money: a foreign government or foreign principal should not be permitted to finance a lawsuit in a Texas court at all. Domestic funding stays legal. It just stops being invisible.
Sources
State-law status reflects a TLR review of enacted statutes and filed legislation, current as of September 2026. Individual bill links appear in the state panel above. Bill status changes quickly during session — check the linked text before quoting.