Corporate giants are abandoning Delaware amid a surge in secretive litigation funding that is driving up legal costs and unsettling investors.
Yesterday, Virtu Financial announced its relocation to Texas, joining at least 30 companies that have left Delaware in the past two years, citing the growing unpredictability of the Court of Chancery. Companies increasingly warn that judicial decisions, perceived as overreach, make the state less attractive for incorporation.
The opaque third-party funding market, now valued at over $20 billion globally, is accused of obscuring who really controls lawsuits, allowing foreign entities and competitors to exploit litigation for strategic advantage. Critics allege that undisclosed funders can prolong disputes, extract sensitive discovery, and undermine national security, while a December 2024 GAO report highlighted possible ties to sovereign wealth funds from China, Saudi Arabia, and France.
Lawmakers and state regulators are pushing reforms: Ohio and North Carolina have enacted registration and disclosure rules, and Congress is considering mandatory disclosure bills. Observers argue Delaware's Chancery Court must adopt a universal disclosure rule, similar to Chief Judge Colm Connolly's 2022 order in the District of Delaware, to restore transparency and halt the corporate flight.