The Delaware Paradigm, Part Three: DExit vs Data: Market Segmentation, Institutional Lock‑In, and the 2026 Effect

Following the Tornetta and Moelis doctrinal disruptions and the legislative responses examined in Parts One and Two [TO LINK], a fundamental question remains: will Delaware’s reforms strengthen or erode its competitive position? Part Three presents our central thesis: Delaware’s dominance persists through market segmentation. This post is current as of February 2, 2026.

Headlines about ‘DExit’—Tesla’s reincorporation to Texas and other high-profile departures—have overshadowed a more nuanced reality. Delaware continues to attract far more incorporations than it loses; its market share among public companies has increased in recent years; and the vast majority of newly public companies still choose Delaware. 

Empirical Evidence: DExit in Context

Despite media attention, DExit may be overstated relative to Delaware’s continuing attractiveness. Delaware maintains 66.7% of Fortune 500 companies as of 2024, with 80% of U.S.-based IPOs in 2023 choosing Delaware as their corporate home.From January to October 2025, only 18 Delaware corporations proposed reincorporation to other states (13 to Nevada, 2 to Texas) and only eight completed reincorporation as of March 2025. 

Recent notable departures include Tesla’s Texas reincorporation, TradeDesk’s Nevada move, and Dropbox’s announced Nevada reincorporation. During the 2025 proxy season, shareholders of seven publicly traded companies with market caps ranging from $1.5 billion to $71 billion approved proposals to reincorporate from Delaware to Nevada. However, this migration pales compared to continuing Delaware incorporations among newly public companies. 

Competitive Responses: Texas and Nevada

Texas has positioned itself as Delaware’s principal competitor through institutional innovations. The Texas Business Court, operational since September 2024, provides specialized commercial litigation with governor-appointed judges serving two-year terms. Texas SB 29, enacted May 2025, codifies business judgment rule protection in statute, permits charter provisions waiving jury trials for internal affairs disputes, and establishes minimum ownership thresholds for derivative litigation. Notably, SB 29 explicitly rejects interpretation based on other states’ laws: ‘the plain meaning of the text of this code may not be supplanted, contravened, or modified by the laws or judicial decisions of any other state’. 

Nevada enacted Assembly Bill 239 in May 2025, permitting corporations to waive jury trials for internal affairs disputes and narrowing controlling shareholder fiduciary duties. The legislation limits controlling shareholder duties to refraining from ‘exerting undue influence over a director or officer with the purpose and proximate effect of inducing a breach of fiduciary duty’. 

Both Texas and Nevada face legitimacy challenges that Delaware has overcome through institutional development over decades: Texas Business Court judges serve only two-year terms, creating uncertainty about judicial continuity; Nevada’s proposed business court remains constitutionally unauthorized. Neither has developed the comprehensive legal ecosystem—specialized bar, responsive legislature, scholarly engagement—that supports Delaware’s institutional advantages.

SEC Policy Shifts: A New Federal-State Dimension

On September 17, 2025, the SEC issued a groundbreaking policy statement concluding that mandatory arbitration provisions requiring investors to arbitrate securities law claims are not inconsistent with federal securities laws and will not impact SEC decisions to accelerate registration statements. This represents the most significant development in securities law arbitration policy in decades.

However, the SEC’s policy creates a potential conflict with Delaware law. Recent DGCL amendments (effective August 1, 2025) added Section 115(c), providing that certificates of incorporation or bylaws may designate a forum for non-internal corporate claims only if the provision ‘allows a stockholder to bring such claims in at least [one] court in this State’. This effectively prohibits mandatory arbitration provisions for such claims. SEC Chair Atkins stated he was ‘disappointed’ by Delaware’s prohibition and urged reconsideration. Whether the Federal Arbitration Act preempts Delaware’s prohibition will likely be contested in future litigation. 

The Dual-Race Equilibrium and 2026 Outlook

We forecast the dual-race equilibrium: Delaware for widely held publics that prize adjudicative premium; Nevada and Texas for controller niches that prize brighter lines. Delaware’s institutional lock-in, explained in Part One, remains hard to copy via statutory transplantation alone. Switching costs and embedded contracting architectures reinforce this stickiness. 

Two 2025–26 pivots are especially salient. First, the Delaware Supreme Court’s per curiam Musk ruling stabilized expectations by correcting remedy overreach without gutting fiduciary oversight, leaving control and ratification questions for another day. Second, the pending constitutional challenge to SB 21 could define the legislature–Chancery boundary: upholding SB 21 would validate broader legislative ability to channel standards and restrict remedies; invalidation would reassert constitutional limits and recenter equity’s core.

For international observers, the takeaways are pragmatic. Delaware’s value proposition for public-company governance remains centered on reason-giving adjudication, norm-setting, and a tripartite standard of review. Private ordering complements this core where the statute authorizes it and fiduciary oversight persists. Legislative recalibration should continue to be measured; otherwise, Delaware risks diluting exactly what distinguishes its product. The Supreme Court’s decision in Tornetta, by taking the narrow path, affirms that equilibrium. Delaware’s next decade will likely be defined by combining judge-centered equity for widely held publics with measured statutory flexibility for controller-centric firms. If executed well, that balance maintains minority protections, curbs litigation gamesmanship, and preserves the adjudicative premium that competitors cannot easily mimic.

The authors’ full paper can be accessed here.

David Chekroun is a Professor of Business Law at ESCP Business School.

Megha Bansal is a J.D. candidate, NYU School of Law.

Tanya Bansal is a Law Clerk at Paul, Weiss, Rifkind, Wharton & Garrison LLP.