We warned in the pages of Fortune last week that the corporate flight from Delaware would only accelerate on the heels of Delaware Chancery Court Vice Chancellor Travis Laster’s controversial and widely criticized decision in the highly watched Cloudflare case. Since then, Virtu Financial has announced its own relocation from Delaware to Texas on Nov. 4, following the recent exits of at least 30 companies over the last two years. Virtu’s move comes as it too is embroiled in pending litigation in Laster’s court, after Laster denied Virtu’s motion to dismiss.
As we’ve written previously, the boards of companies moving out of Delaware most often cite the same concern: they can no longer predict how the state’s Chancery Court, once prized for its consistency and predictability, will treat them, amidst a series of decisions widely construed as judicial overreach. The legislature has tried to correct this problem through SB21, but certain Chancery judges continue to seemingly defy the will of the legislature, and the Delaware Supreme Court has inadvertently undermined their own efforts to overturn erroneous decisions by remanding cases back to the same judges.
But a second blind spot gets far less attention, and it may matter just as much. A Delaware company can be hauled into the Court of Chancery today with no way of knowing who is paying for the lawsuit against it, whether that backer controls settlement, or whether it is a competitor or a foreign state amidst a surge in litigation backed by litigation finance firms.
The legal philosopher Jeremy Bentham wrote that “publicity is the very soul of justice.” One of the quiet strengths of the American legal system is how much of that ideal it has honored. Our courts function in the open, with public proceedings, published rules, and disclosure requirements designed to ensure that judges, litigants, and the public can understand who is driving a case—and why. Those features are not procedural niceties; they are cornerstones of trust in the judiciary itself. Delaware’s century-old promise to corporate America rested on the same idea: boards and litigants could see the rules and the players before they acted. Undisclosed third-party litigation funding cuts against that promise in the one court that matters most to American business.
A growing, mostly invisible market of litigation finance which has become perverted away from original noble intention
The global litigation finance market was estimated at $20.6 billion in 2025, with forecasts that it will more than double over the next decade, and U.S. commercial funders alone managed roughly $16 billion in assets at the end of 2024. This is a market which has already grown exponentially, as it barely existed merely two decades ago. At its best, litigation funding expands access to justice for plaintiffs who could not otherwise afford to be heard, a noble founding intent as it was envisioned by the widely admired founders of the field. But as litigation finance firms have proliferated exponentially over recent years, the actual practice of litigation finance has frequently become perverted from those noble founding aims, with key challenges including that too often, it is opaque, undisclosed, and strategically deployed. It obscures the real parties who have an interest in dragging out litigation and obfuscates what ulterior motives they may have, distorts the incentives that are supposed to drive a case toward resolution, and risks undermining the integrity of the courts themselves.
Unlike the contingency-fee arrangements familiar to American law, many third-party investments by litigation finance firms involve opaque layered structures of who gets paid, and complex ownership that remain invisible to judges and opposing parties. No federal statute or rule requires disclosure of even the existence of a litigation funder—let alone whether that litigation funder holds sway over litigation strategy or settlement decisions, as they sometimes do.
Real risks of undisclosed hidden litigation finance, including most alarmingly to national security
The potential harms are concrete from undisclosed litigation finance firms underwriting litigation. First, an outside litigation funder’s investment return thresholds can push it to resist settlement and prolong disputes, at real cost to litigants and to judicial resources. Second, a funder may not be motivated by financial profit at all. An undisclosed entity can underwrite suits to impose burdensome costs on a competitor for competitive harm, and when the money answers to a foreign state, the concern becomes one of national security. A December 2024 Government Accountability Office report found stakeholders pointing to funders from China, Saudi Arabia, and France, while conceding that the full extent of such funding is unknowable given how little is disclosed. The industry’s ties to foreign capital are not speculative, as one firm has announced a “strategic capital relationship” with a sovereign wealth fund, while another is now majority-owned by a consortium led by Mubadala, Abu Dhabi’s sovereign investor. Our courts are open by design, but openness should not mean naïveté.
This isn’t hypothetical. A Shenzhen-based firm led by the general counsel of Chinese electronics giant TCL was revealed to be financing patent suits against Samsung in U.S. courts , and Samsung later alleged that the funder had misused its confidential information to compete unfairly.
America’s famously broad civil discovery magnifies the danger. Justified by the principle that both sides should have access to the facts, discovery is estimated to account for 50% to 90% of the cost of litigating a case. That lets a funded plaintiff run up a defendant’s bill as an end in itself, or as a way to operationally hinder a competitor by requesting a document dump of sensitive strategic files of limited relevance to the actual litigation at hand, but of huge importance to sensitive industry and strategic competition. Indeed, when a lawsuit is secretly financed by an entity with strategic or geopolitical motives, discovery can become nothing more than a mechanism for extracting sensitive information under the protective cover of judicial process, with that sensitive information subsequently used by hostile foreign powers to undermine American companies unfairly.
Delaware’s federal court has already proved disclosure works
Patent litigation shows the pattern at scale. Patent cases absorbed 32% of new litigation-funding commitments in 2024, up from 19% a year earlier and the largest single category, and roughly 30% of patent suits are now estimated to be funded. Most of the large technology companies the GAO interviewed said that more than half the patent suits filed against them involve confirmed or suspected third-party funding. The suits increasingly come from non-practicing entities that make no products but acquire patents to monetize them in court: in 2025, NPEs filed 55% of all district-court patent cases and 90% of those in the high-tech sector.
Because the U.S. Supreme Court held in TC Heartland that a corporation “resides” for patent-venue purposes only in its state of incorporation, Delaware’s federal district court is a default venue for patent suits against Delaware corporations. In April 2022, Chief Judge Colm Connolly ordered parties before him to disclose any litigation funder and whether it controls litigation or settlement decisions. The results were revealing. Patent filings in the district fell 41% over the following two years, against a 15% national decline, and funded patent cases in his courtroom virtually disappeared. It was Connolly’s order that surfaced the profoundly disturbing Chinese TCL-linked funder behind the Samsung suits mentioned previously. Transparency, it turns out, discourages the litigation that least wants to be seen.
Delaware Chancery Court is the gap
Delaware’s state courts have been slower to follow. To their credit, on Sept. 30, 2026, the Superior Court amended its rules to permit discovery into a funder’s existence, identity, and control rights while shielding the funding agreement itself absent a showing of good cause. But the Court of Chancery—the most important court in the nation for corporate disputes—has adopted no corresponding rule and proceeds case by case. Its judges have taken notice of the problem. In Burkhart v. Genworth, a putative class action decided in 2024, Vice Chancellor Nathan Cook ordered the plaintiffs to produce their funding agreement in full, warning that such cases are “especially ripe for a third-party funder to exercise improper control over the litigation.” That ruling shows the court understands the stakes, but a single order in a single case by one of the court’s seven judges, won only after a motion to compel, falls well short of a universal disclosure requirement.
The gap matters, because Chancery is where corporate America’s stockholder litigation lives, as the single most important court for American businesses in the entire country. When a court and defendants do not know who stands behind a complaint, it cannot fully assess conflicts of interest, police litigation conduct, or tell whether decisions are being driven by the named plaintiff or by an undisclosed backer with very different and ulterior objectives. None of this is a criticism of judges, who can only manage what is disclosed to them. The problem is structural – and easily fixable by the Delaware Chancery Court.
The rest of the country isn’t waiting
The case for reform is increasingly difficult to ignore. Members of Congress have pressed the judiciary to move faster. The chairman of the House Oversight Committee urged the Judicial Conference in 2024 to consider mandatory disclosure, citing foreign money in U.S. lawsuits; a bipartisan Senate bill introduced in 2023 would require any foreign funder to disclose its role and bar sovereign wealth funds from financing U.S. litigation; and four senators introduced legislation this February requiring disclosure in federal class actions and multidistrict litigation.
Regulators and states are moving too. The International Trade Commission proposed in April to require disclosure of funders in Section 337 proceedings, the arcane but consequential cases that determine whether foreign goods can be blocked from the U.S. market. Ohio enacted a law in July requiring funders to register and disclose their agreements, barring them from influencing how a lawsuit is handled or settled, and prohibiting foreign funders outright. North Carolina on June 22 became the first state to prohibit third-party litigation investment altogether. More than 20 states have now enacted laws regulating the practice, and New Jersey’s Assembly passed a disclosure bill in June.
Transparency is the remedy. Full, universal disclosure simply ensures that judges and litigants know who the real stakeholders are and what their motives may be —just as they already do when funders back class actions in the Northern District of California, when creditor groups organize in a bankruptcy, and when an investor accumulates more than 5% of a public company. Capital markets function on disclosure, not secrecy. Shareholders disclose ownership. Political donors disclose contributions. Judges disclose conflicts. The notion that litigation funders should be uniquely exempt makes no sense.
Boards leaving Delaware cite the increasing unpredictability of the Delaware Chancery Court and the cost of stockholder litigation, but undisclosed litigation funding feeds both. The fix is a Chancery rule modeled on Chief Judge Connolly’s order, requiring parties at the outset of a case to disclose whether a funder exists, who it is, and whether it controls strategy or settlement.
Justice Louis Brandeis observed that sunlight is said to be the best of disinfectants. Delaware built its reputation by letting everyone see the rules. It should let everyone see who is paying to litigate under them.
Disclosure: The authors presented their research on dual class shares to a special committee of Cloudflare’s board, a Delaware company currently in litigation in the Court of Chancery.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
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