As the Trump administration makes lowering costs for American families a central goal of its economic agenda, a growing body of research is pointing to a largely overlooked contributor to higher prices across the economy: third-party litigation funding.
Third-party litigation funding (TPLF) allows outside investors to finance lawsuits in exchange for a portion of any settlement or court award. While once confined to niche commercial disputes, the practice has expanded rapidly in recent years, turning the United States into the global epicenter of litigation finance — and, critics argue, magnifying its economic consequences.
According to research from Swiss Re Institute, the U.S. generates 25 percent of global GDP but now accounts for more than half of all third-party litigation funding activity worldwide. Many of these funded verdicts and settlements exceeded $5 million. Industry estimates place the global litigation-funding market at roughly $19 billion in 2024, with projections suggesting it could grow to more than $50 billion within the next decade.
While supporters of TPLF argue the practice expands access to justice by helping plaintiffs take on well-funded defendants, a new nationwide economic analysis suggests the broader costs far outweigh those benefits.
A report released exclusively to InsideSources by The Perryman Group found that litigation financing imposes a $54.2 billion annual drag on the U.S. economy, driven by higher legal costs, increased insurance premiums, and reduced business investment.
The study modeled how increased litigation activity affects economic behavior across multiple sectors. Analysts found excess litigation added an estimated $35.8 billion per year in costs to major industries, including banking, manufacturing, business services, and retail. Much of that burden stems from rising legal defense costs, higher liability exposure, and increased insurance expenses.
“TPLF fuels the wave of frivolous litigation that raises costs across the economy, leaving families with less money in their pockets and fewer opportunities to get ahead while these wealthy outside investors earn millions in tax-free profits,” said Victor Gomez, executive director of Citizens Against Lawsuit Abuse (CALA), which commissioned the report.
Those costs do not remain isolated to corporate balance sheets, the report found. Instead, they ripple outward, reducing investment, slowing job creation, and pushing prices higher for consumers.
“As businesses absorb higher litigation and insurance expenses, those costs are passed on to consumers through higher prices, increased premiums, reduced wages, and job losses,” Gomez said.
The Perryman analysis estimates that litigation-driven costs slowed job growth enough to eliminate or prevent approximately 454,450 jobs nationwide. Consumer costs rose by $31.1 billion annually across sectors including pharmaceuticals, insurance, and retail.
When those excess tort costs were fully factored in, analysts estimated inflation rose by more than 1.35 percent, translating into an average annual loss of $608 for American families and $193 for individual consumers.
The economic impact extended beyond households and businesses. The report found that suppressed economic activity reduced federal, state, and local government revenues by roughly $15 billion per year, due to slower growth in housing demand, commercial real estate development, and consumer spending.
America’s outsized role in the litigation-finance industry amplifies those effects. Unlike several other countries with active TPLF markets, the U.S. has few uniform disclosure rules. In most cases, neither judges nor juries are informed when outside investors are funding litigation or who ultimately stands to profit from a settlement.
That lack of transparency has raised alarms on Capitol Hill, particularly as reports have emerged that foreign entities — including adversarial governments — may quietly invest in U.S. lawsuits.
Litigation profits are currently taxed at capital-gains rates, which are lower than ordinary income taxes. Proposals to tax litigation profits at ordinary income rates were not included in last year’s One Big Beautiful Bill, which Rep. Kevin Hern, R-Okla., and Sen. Thom Tillis, R-N.C., described as a missed opportunity.
“Without this reform, foreign adversaries and investors exploit our courts, harming American businesses and consumers,” Hern said.
Other legislative efforts have stalled as well. Bills introduced by Rep. Darrell Issa, R-Calif., that would have required disclosure of third-party funding arrangements failed to advance, drawing criticism from both Republicans and Democrats who argued the proposals were overly broad and could disadvantage small plaintiffs or startups.
Supporters of litigation funding maintain that the practice allows plaintiffs with legitimate claims to pursue justice they otherwise could not afford. However, critics say the influx of outside capital changes litigation incentives, encouraging prolonged legal battles and discouraging early settlement.
While the Perryman Group report did not endorse a specific legislative solution, it emphasized the need for greater transparency and accountability.
“Addressing these distortions could significantly enhance economic growth, reduce inflationary pressures, and improve fairness for consumers while preserving legitimate legal claims,” Gomez said.
With inflation still weighing heavily on voters and economic costs at the forefront of the 2026 election cycle, some Capitol Hill insiders remain hopeful that litigation-finance reform could gain traction before the midterms.