A bipartisan coalition of U.S. Senators introduced sweeping federal legislation on February 12, 2026, that would require mandatory disclosure of third-party litigation funding (TPLF) in class actions and multi-district litigation proceedings. The Litigation Funding Transparency Act of 2026, sponsored by Senators Chuck Grassley (R-IA), Thom Tillis (R-NC), John Kennedy (R-LA), and John Cornyn (R-TX), represents the most significant federal legislative push for TPLF transparency to date.

As reported in the U.S. Chamber Institute for Legal Reform, the legislation would mandate public disclosure of third-party litigation funding arrangements and the underlying funding agreements in federal class actions and MDLs. Critically, the bill would also prohibit funders from controlling decision-making or overall litigation strategy in these cases. The legislation includes specific provisions requiring disclosure of foreign funding sources, addressing growing national security concerns about foreign entities bankrolling American litigation.

"Outside financiers treat our court system like a casino. They drive up costs for consumers and put our national and economic security at risk," said ILR President Stephen Waguespack in response to the bill's introduction. The legislation includes exemptions for domestic nonprofit organizations providing services on a nonprofit basis and certain commercial enterprises expecting loan repayment.

The U.S. Chamber of Commerce and multiple industry groups have endorsed the legislation, emphasizing that transparency will hold litigators accountable and protect consumers from rising costs and delays caused by external financial influences. The bill text is available through the Senate Judiciary Committee, marking a potentially transformative moment in the ongoing debate over litigation finance regulation.

Arizona is moving to tighten oversight of law firms that outsource legal work across state lines, signaling a renewed focus on the ethics and economics of cross-border legal services. The shift reflects broader concerns about client protection, unauthorized practice of law, and the evolving structure of modern law firms that increasingly rely on distributed teams.

An article in Bloomberg Law reports that the Arizona Supreme Court is advancing measures designed to limit the extent to which Arizona-licensed firms can “ship” legal work to lawyers in other jurisdictions. The proposed changes would require clearer disclosure when out-of-state attorneys handle matters for Arizona clients and reinforce rules around supervision and responsibility. Regulators have expressed concern that some firms may be leveraging lower-cost legal labor in other states without ensuring adequate oversight, potentially exposing clients to risk.

While outsourcing and multi-jurisdictional practice are hardly new phenomena, the court’s action underscores mounting scrutiny of how legal services are delivered in an era of remote work and alternative business structures. Arizona has been at the forefront of legal innovation, notably as the first US state to eliminate Rule 5.4’s ban on non-lawyer ownership of law firms. Yet this latest development suggests that innovation will be accompanied by guardrails aimed at preserving ethical standards and accountability.

For law firms operating nationally—or those backed by external capital—the message is clear: regulatory arbitrage may face increasing resistance at the state level. As alternative legal service models continue to expand, courts and regulators are likely to sharpen their focus on supervision, transparency, and client protection.