The justice gap

According to the Legal Services Corporation's 2022 Justice Gap Report, 92% of the civil legal problems faced by low-income Americans receive inadequate or no legal help whatsoever.

But this isn't just a problem for low-income Americans — middle-income Americans and small businesses frequently find themselves in the same predicament, priced out of traditional legal services.

There's enormous demand for legal services, but the traditional hourly rate model makes these services inaccessible to most people and small businesses. As a result, millions navigate complex legal issues without proper guidance.

This presents a compelling opportunity for legal platforms and firms to establish new delivery models that make legal help accessible to those currently underserved.

Opportunities for AI to democratize legal services

1. Established legal platforms integrating with AI

Companies like LegalZoom, Trust & Will, and Rocket Lawyer already serve individuals and small businesses, making them well-positioned to build tools to improve access to justice.

They already have an established customer base, B2C business model, and marketing infrastructure to support this capability, giving them an advantage over other companies.

However, one key barrier for these platforms is navigating UPL regulations (more on this below), which leads us to the next opportunity.

2. Law firms building client-facing AI agents

I spoke about this in last week’s newsletter, but another opportunity to use AI to improve access to justice is via law firms building client-facing agents.

These systems could address basic inquiries like generating document drafts and providing preliminary guidance on common legal issues, all supported by their respective firm's expertise and supervised by licensed attorneys.

This model would enable firms to implement a tiered service approach:

Routine matters can be handled through AI agents at a fraction of the traditional costMore complex issues requiring professional judgment can be escalated to attorneys

For small businesses that currently forgo legal help due to cost concerns, this could create an intermediate option between proceeding without legal advice and paying premium hourly rates.

Why this hasn’t happened yet

Despite the clear opportunity, several obstacles have impeded progress:

Unauthorized Practice of Law (UPL) Regulations

Current regulations in most jurisdictions prohibit non-lawyers from providing legal advice, creating significant uncertainty for AI systems designed to offer legal guidance.

However, recent developments show some promise. More and more people are realizing that UPL rules may need to be modernized to accommodate rapid advances in AI.

Law Firm Ownership Restrictions

In the majority of U.S. jurisdictions, only lawyers can maintain ownership of law firms.

This restriction prevents external capital investment in innovation and constrains the development of technology-driven legal service companies with the scale necessary to serve the mass market.

Business Model Challenges

The current regulatory environment necessitates having attorneys "backstop" AI systems, with explicit disclaimers that AI-generated content does not constitute legal advice — a necessary measure to avoid UPL violations.

However, this approach requires heavy involvement from the law firm. Alternatively, a technology company could employ staff attorneys, but this arrangement faces complications due to law firm ownership restrictions.

This regulatory framework creates significant barriers to achieving scale in AI-powered legal services.

My perspective

Despite my legal background, I regularly avoid engaging counsel for matters that would benefit from professional advice, primarily because it’s just too expensive.

Like many startup executives, we often rely on template documents or ChatGPT for answers to our legal questions, which opens up risks in exchange for smaller costs.

I think I speak for all small business owners and entrepreneurs when I say that access to cheaper legal services would be beneficial.

Looking ahead

As AI capabilities continue to advance, pressure will likely increase to modernize regulations in ways that protect consumers while fostering innovation.

Several jurisdictions are already exploring modifications to UPL rules for specific categories of legal servicesRegulatory sandboxes in states like Utah and Arizona are facilitating controlled experimentation with alternative legal service delivery models

These initial efforts suggest a potential path forward, though widespread reform will require significant time. In the interim, the most promising approaches will operate within existing regulations while testing their boundaries.

The opportunity is compelling: democratizing access to legal services could transform millions of lives while creating valuable businesses. For entrepreneurs and law firms willing to navigate the regulatory complexity, few markets offer such substantial untapped potential for both social impact and commercial success.