(FORTUNE Magazine) – If there were a futures market for litigation against investment banks, says University of Texas securities law professor Henry Hu, it would be as volatile as the Nasdaq. The chart spiked up last summer when Merrill Lynch settled a conflict-of-interest case involving its former Internet analyst Henry Blodget. Then came a precipitous drop only weeks later after a judge dismissed a suit against Morgan Stanley's Mary Meeker. Now there's been a bungee-like rebound, thanks to New York attorney general Eliot Spitzer and the infamous e-mails that led to his recently announced $100 million Merrill settlement.

Plaintiffs lawyers are being "bombarded with calls," says Jacob Zamansky, who helped set all of this in motion last July when he extracted $400,000 for a client who blamed his stock losses on Blodget's allegedly tainted recommendations. He then handed evidence from that case to Spitzer. Now Zamansky says his New York office is fielding "hundreds" of calls per week from investors looking to bring arbitration cases. But the larger financial threat to Merrill and the rest of the investment banks will come from the dozens of class actions, which are likely to be consolidated. (Brokerage agreements, which require that investors submit claims to private arbitration, do not prevent them from joining class actions.) Since Merrill's $100 million settlement with Spitzer doesn't require it to admit guilt, plaintiffs won't be able to use the settlement as evidence. Still, says Hu, the liability in private litigation is likely to be substantial.

Merrill CEO David Komansky downplays the threat. "We feel that we have very strong defenses against the class-action suits," he said in a recent conference call. Indeed, for all of the securities litigation of the past decade, most of it has focused on the companies that issue stock rather than on the banks that underwrite them. So it's not clear how courts will respond to claims that analysts perpetrated a "fraud on the market." That will require plaintiffs lawyers to show that the Merrill recommendations moved stock prices--a tricky proposition if other firm's analysts were touting the same stocks, as was often the case. On the other hand, it could force Merrill into the uncomfortable position of having to argue that its analysts have no influence.

Ultimately, most securities suits are settled. The Spitzer e-mails give the plaintiffs enough evidence to survive motions to dismiss the cases, which sends the settlement value up "enormously," says St. John's University law professor Michael Perino. If the plaintiffs deflect this preliminary motion, the discovery process begins--and defense costs quickly rise as battalions of lawyers are deployed to handle document requests. Most defendants would rather settle than have lawyers rooting around in their files. So with plaintiffs lawyers salivating at what could be more embarrassing disclosures from investigations into every major investment bank, the litigation futures market could easily outdo the Nasdaq.