Third-party litigation funding has spent years hovering between two legal narratives. In one, it is a valuable access-to-justice tool, allowing claimants to pursue meritorious claims they could not otherwise afford to litigate. In the other, it is an opaque and potentially distorting force, capable of influencing litigation strategy, settlement incentives, and the economics of procedure from behind the scenes. In early 2026, that debate became more concrete.

On February 11, 2026, Senators Chuck Grassley and Thom Tillis introduced the Litigation Funding Transparency Act of 2026. As described by the Senate Judiciary Committee Republicans, the bill would require disclosure of third-party funding in civil actions and would bar funders in class actions and multidistrict litigation from directing litigation strategy or settlement decisions. Around the same time, New York's consumer litigation funding regime moved toward implementation. The statutory framework now contains detailed disclosure rules, a rescission period, registration requirements, and annual reporting obligations, with the new article taking effect on June 17, 2026.

Taken together, these developments suggest that litigation funding is increasingly understood as part of the legal infrastructure of adjudication. Once funding arrangements are seen as shaping the practical conduct of litigation, the core regulatory question can no longer be whether they exist, but how law should structure them.

Much of the public debate still frames the issue too crudely. Supporters often emphasize access to justice, while critics stress secrecy, profiteering, and undue influence. Both concerns are real, but neither captures the full legal problem. While disclosure might necessary, alone it does not resolve the central institutional difficulty. Even a fully disclosed funding arrangement leaves unanswered questions about control, loyalty, information-sharing, and settlement authority.

That is why the present moment is especially useful for thinking beyond the usual binary. The federal bill focuses attention on transparency and noninterference. New York's statute focuses on consumer protection and market supervision. But the underlying relationship is more complicated than either a simple loan or a simple investment. A funded claim involves a claimant, a funder, and a lawyer whose incentives are related but not identical. The claimant may be under severe financial pressure. The funder has capital at risk and wants a return. The lawyer owes professional duties to the client but operates within a triadic structure shaped by the funding agreement. Private law has not yet developed a satisfying vocabulary for this arrangement.

In a recent Article, co-authored with Yifat Naftali Ben-Zion, we suggest framing the financing relationship as a quasi-partnership.  The article Partners in Claim: Litigation Funding as Quasi-Partnerships argues that litigation funding should be understood through the logic of limited partnership law. On that approach, the funder resembles a limited partner: entitled to protection for its financial stake, but not to direct the management of the case. The claimant remains the analogue of a general partner: retaining substantive control over the claim, while also bearing duties not to undermine the shared enterprise opportunistically. The lawyer, in turn, occupies a more demanding position than current doctrine tends to acknowledge, because the funding structure affects obligations of loyalty, disclosure, and information management.

That framework helps explain why current reforms are both promising and incomplete. Rules requiring disclosure are sensible, but they are only the surface layer of regulation. The harder issue is how to preserve the access-to-justice benefits of funding without allowing financial dependency to distort litigation conduct or settlement. A good legal regime should therefore do more than expose funders to view. It should clarify what kinds of influence are impermissible, what kinds of monitoring are legitimate, what information can be shared without compromising procedural fairness, and how the law should respond when the claimant's interests and the funder's interests diverge.

In that respect, the 2026 developments are welcome not because they settle the debate, but because they show that the debate has matured. Litigation funding can no longer remain in a doctrinal gray zone governed only by ad hoc contract terms and generalized ethical anxieties. If funding is becoming a regular feature of modern civil justice, then procedure and private law need a more precise architecture for it. The question is no longer whether to regulate litigation funding. It is whether we can regulate it in a way that preserves access to justice while taking structure, loyalty, and control seriously.