The last 12 months have delivered fundamental changes to the business of law, whether economic, political or technological.[1] The litigation funding industry has navigated similar changes, with certain firms pivoting in the process.[2]
The forecast for the litigation funding industry in 2026 projects a continuation of recent developments. Here are five trends we expect will continue to shape the development of litigation finance.
1. Increase in Appellate Monetization Funding
We saw a drastic increase in inquiries for appellate monetization funding in 2025, and only expect this to increase in 2026.
This is the process by which a funder monetizes part of a successful trial verdict that is still subject to appellate or collection risk. For instance, a litigant who wins a $50 million jury trial could monetize $10 million through a funder, and receive that money immediately, in exchange for sharing some of the upside of a successful appeal. If the trial is reversed on appeal, the litigant still keeps the $10 million.
Appellate monetization funding was prominent in the late 2010s, but in the early 2020s, litigants turned to judgment preservation insurance. JPI is where insurance companies charge a premium to take on the risk that a successful verdict will be reversed on appeal.
The availability of JPI in the last several years has diminished dramatically in light of insurers suffering significant losses on those policies. For example, according to Bloomberg Law, Liberty Mutual has backed out of several potential JPI deals due to an appellate reversal of a $1.6 billion judgment for which it provided insurance — specifically, the U.S. Court of Appeals for the Fifth Circuit’s 2024 decision to reverse the plaintiff’s win in BMC Software Inc. v. IBM.[3]
Indeed, for many cases, these JPI policies no longer appear available at all. This change to JPI availability has led to a reemergence of appellate monetization funding.
While JPI and appellate monetization funding are different, and some plaintiffs may prefer one over another, they often serve a similar goal — recognizing and protecting some of the value of a trial victory.
For lawyers, staying abreast of these changes is necessary to helping clients navigate and manage their budget and litigation risk.
2. Developments in Funding Transparency and Regulation
Federal legislative attention regarding litigation finance in 2025 focused mainly on taxation and disclosure.
In May 2025, Sen. Thom Tillis, R-N.C., introduced a new federal bill targeting litigation finance. The bill, titled Tackling Predatory Litigation Funding Act, would have imposed a 40.8% tax on litigation proceeds, while also eliminating many of the normal offsets, deductions and pass-throughs common to partnerships and business income.[4]
The proposal received significant pushback from lawyers, financial institutions and a diverse cross section of political advocates, and eventually failed on procedural grounds.[5] Nonetheless, the proposal represented a marked change in the regulatory debates over litigation funding.[6]
On the issue of disclosure, the U.S. Judicial Conference’s Advisory Committee on Civil Rules had a meeting in October 2025 in which it discussed, among other topics, whether to propose a rule on disclosure of litigation funding.
The committee decided to continue the discussion as it grappled with complex questions over the amount of disclosure, publicity, and the difficulty in distinguishing commercial litigation funding from traditional methods of paying for litigation — such as contingency fee lawyers, equity investors, bank loans and liability insurance.[7]
Beyond the federal courts, several states passed laws in 2025 to regulate or impose greater disclosure on the litigation funding industry. Notably, there was room for compromise. In Kansas, for example, the International Legal Finance Association — the trade association for commercial litigation funders — jointly supported compromise language with the U.S. Chamber of Commerce within a bill, S.B. 54, that would provide disclosure while preserving access to justice.[8]
Going forward, debates over the proper statutory and regulatory balance for litigation funding will inevitably continue, even as parties find some common ground. Those rules will shape how attractive litigation funding is to investors, and therefore the availability of capital to litigants and their lawyers.
3. Funding in Cross-Border Disputes
Companies, industries and supply chains are increasingly globalized. The same is becoming true of corporate transactions and even litigation.[9]
Law firms are adjusting to this globalization of the legal industry.[10] In 2024, London-based Allen & Overy LLP and Manhattan-based Shearman & Sterling LLP officially merged — becoming Allen Overy Shearman Sterling — after first announcing plans to do so the year prior.[11]
In late 2025, Winston & Strawn LLP and the U.K.’s Taylor Wessing LLP announced a plan to merge this year to form a new transatlantic law firm with 1,400 lawyers across the U.S., U.K. and Europe.[12]
Only a few days after that announcement, Hogan Lovells and Cadwalader Wickersham & Taft LLP announced their intention to combine. Cadwalader’s co-managing partner, Wes Mission, said the merger “fulfills our shared ambition to create a global firm with a strong transatlantic platform.”[13]
When it comes to chasing fraud or collecting on judgments, there is often a need to cross borders. Litigation funders have taken notice, and members of the International Legal Finance Association now have offices throughout the world.[14]
The good news is that increased expertise and sophistication is unlocking more capital for valuable international claims.[15] Law firms are developing experienced teams that can pursue a cross-border claim from start to finish. This expertise is crucial because these cross-border disputes, especially judgment enforcement, can raise complex and unique legal and political issues.
Overall, we expect this development to move forward with increasing speed as international and cross-border disputes, and the funding associated with them, become less of a niche specialty and more commonplace.
4. Changes to Patent Litigation
As practitioners know well, there is nothing simple about patent litigation. It often involves complex technology, nuanced technical and legal issues, and a lot at stake when disputes develop. It is also a situation where underresourced patent holders sometimes turn to litigation funding. But the playing field has been shifting.
In 2025, the U.S. Patent and Trademark Office modified the process by which issued patents are reviewed in postgrant proceedings, affecting how patent holders, defendants, lawyers and litigation funders evaluate duration and other risks in this area.
Among the consequential changes in 2025, the USPTO streamlined early stage inter partes review practice, including consolidating IPR institution decision-making with the USPTO director [16] and adjusting its discretionary denial practice.[17]
For those who do not practice patent litigation, parties can ask the USPTO’s Patent Trial and Appeal Board to review issued patents and challenge them as unpatentable in IPRs.[18] This exists as an administrative review procedure separate from, and in addition to, defendants challenging patents in federal district court cases.
By modifying the institution decision and discretionary denial practice, the USPTO has indicated that it will be harder for defendants or targets of patent litigation to attempt to use IPRs as an additional barrier. By late 2025, practitioners had observed more discretionary denials.
What does this mean in practice?
Litigation funders — right alongside patent holders — are reassessing the value of patents where the expected cost and duration of litigation may be changing. Legal budgets are being adjusted to reflect the new duration estimates.
Looking ahead, we expect increased attention to intellectual property rights. Patent litigation remains one of the most complex and treacherous areas of litigation for plaintiffs, but these procedural changes by the USPTO are requiring lawyers and funders to recalibrate their original assessments in real time as the effects of the rule changes settle.
5. Structuring for Law Firm Financing
Running a law firm has never been more capital-intensive, with increasing costs related to cybersecurity, analytics and technology-enabled workflows. Moreover, the cost of lateral hires and maintaining high performers has steadily increased.
Litigation funders, as well as more traditional private equity firms, have been gradually crafting different financing structures in response.
One of those structures involves utilizing a management services organization. Put simply, an MSO is a separate, nonlawyer-owned business that provides the operational backbone for a law firm — e.g., finance, human resources, IT, intake and marketing — under a services contract.
The law firm remains lawyer-owned, while the MSO contributes capital, professional operators and scalable infrastructure. This division is what aligns MSOs with the professional responsibility rules in most U.S. jurisdictions.[19]
It’s helpful to contrast MSOs with alternative business structures. An ABS allows nonlawyer ownership inside the law firm itself in jurisdictions that permit it — notably Arizona, Washington, D.C., and Puerto Rico.[20] This has been a way to incorporate nonlawyers into operations or access capital through the sale of equity.
Both the MSO and ABS structure present opportunities and constraints. Benefits can include more available capital and less friction in running a modern law practice. On the other hand, drawbacks can include a more complicated structure, including potential outsourcing of administrative responsibilities.
In 2026, these financial structures may become more commonplace, but law firms will need to consider a holistic assessment of these benefits and risks.
CONCLUSION
We expect these five trends to continue, shaping the development of litigation funding industry, the legal profession and the combination of the two. And in a year, we’ll see how these trends have changed.
Jeffery Lula is a managing director at GLS Capital.
Citations:
[1]https://www.nytimes.com/2025/12/19/business/economy/trump-trade-global-econ.html.
[2]https://www.cdr-news.com/categories/third-party-finance/therium-winds-down-funding-launches-funding-advisory-arm/.
[3]https://news.bloomberglaw.com/business-and-practice/liberty-insurers-take-hit-on-1-6-billion-ibm-judgment-policy (Insurers have “have reduced the percentage of judgments they’re willing to cover and increased pricing.”).
[4]https://www.mwe.com/insights/proposed-bill-would-create-new-tax-regime-introducing-uncertainty-and-threatening-broad-credit-markets-and-beyond/ (“The Bill would establish a standalone income tax regime that departs from the traditional US income tax framework in both scope and structure and would override a number of long-standing income tax principles such as the treatment of partnerships and forward contracts, favorable tax treatment for tax-exempt entities and foreign governments, and the portfolio interest exemption.”).
[5]https://news.bloomberglaw.com/business-and-practice/litigation-funders-tax-bill-escape-spurs-industry-reckoning (“Prominent conservative figures took up the cause on social media, offering differing viewpoints.”).
[6]https://www.washingtontimes.com/news/2025/jun/25/dont-weaponize-tax-code-litigation-finance-industry/ (“Sen. Thom Tillis, North Carolina Republican, wants his colleagues to weaponize the tax code to hobble the litigation finance industry…”).
[7]https://www.uscourts.gov/sites/default/files/document/25-cv-o_suggestion_from_international_legal_finance_association_-_tplf.pdf.
[8]https://natlawreview.com/article/breaking-down-first-legislative-compromise-commercial-litigation-funding (“SB54 demonstrates that compromise is attainable in the historically polarized litigation funding disclosure debate.”).
[9]https://www.corporatedisputesmagazine.com/quarterly-disputes-barometer-oct-dec-2025 (“Global economic instability is prompting a noticeable increase in cross-border legal disputes, with trade policies and sanctions emerging as key catalysts. This trend is being driven by a confluence of macroeconomic and geopolitical factors, including shifting trade policies, sanctions regimes and regulatory enforcement.”).
[10]https://davidtakayama.info/2025/09/30/cross-border-litigation-how-globalization-is-reshaping-legal-strategy/ (“In today’s interconnected economy, legal disputes are no longer confined within national borders. Globalization has expanded commercial relationships, increased regulatory complexity, and ushered in a new era of cross-border litigation.”).
[11]https://news.bloomberglaw.com/business-and-practice/a-o-shearman-launch-tests-firms-ability-to-crack-big-law-elite.
[12]https://news.bloomberglaw.com/business-and-practice/winston-strawn-taylor-wessing-announce-merger-set-for-2026.
[13]https://www.lawgazette.co.uk/hogan-lovells-and-cadwalader-in-record-transatlantic-merger/5125458.article.
[14]https://www.ilfa.com/membership-directory; see
also https://globalarbitrationreview.com/article/canadian-miner-wins-damages-over-peruvian-project-protests/ (“A Canadian company says it has won more than US$44 million in a third-party funded ICSID claim against Peru…”).
[15]https://todaysgeneralcounsel.com/why-gcs-should-approach-litigation-valuation-like-a-litigation-funder/.
[16]https://www.uspto.gov/sites/default/files/documents/Director_Institution_of_AIA_Trial_Proceedings.pdf.
[17]https://www.uspto.gov/sites/default/files/documents/InterimProcessesPTABWorkloadMgmt-20250326.pdf.
[18]https://www.uspto.gov/patents/ptab/trials/inter-partes-review.
[19]https://www.hklaw.com/en/insights/publications/2025/12/everything-old-is-new-again (“The rise of MSOs may represent an evolution in law firm operations, but they are not a deviation from professional conduct rules. With thoughtful structuring and adherence to well-established guardrails, law firms and MSOs can build partnerships that bring meaningful innovation to lawyers and their clients, without compromising the ethical values of the legal profession.”).
[20]https://news.bloomberglaw.com/business-and-practice/tax-friendly-puerto-rico-approves-non-lawyer-owners-of-law-firms.
Source:
This article was originally published by Law360.
