A National Sandbox for Legal Innovation (In Context of USA)

By Ashwin Telang (Ashwin is a student of Journalism & Economics at Northwestern University)

For millions, justice remains a luxury good. The Legal Services Corporation reported in 2022 that low-income Americans cannot afford legal services for 92% of their civil legal problems. Life-altering issues like evictions, domestic violence cases, and healthcare denials are left unresolved, not because they lack merit but because they are priced out of justice. 

This justice desert isn’t accidental topography. Congress and the Supreme Court have spent decades rejecting calls for universal civil counsel, leaving innovation to sprout in unlikely cracks. Legal technology startups instead are employing AI and machine learning models to expand legal access to underserved groups.

In 2021, a non-lawyer entrepreneur in Florida developed an app, TIKD, that connected people with low-cost attorneys and intelligent AI to represent them in traffic court. The Florida Bar attacked TKD and the Florida Supreme Court ruled that it violated existing regulation, forcing app termination. The court reasoned that since TIKD was not owned by a law firm or lawyer, it lacked the skill and training to provide quality legal services. 

Indeed, depression-era regulations are partially to blame for driving up legal fees and the deficit in legal technology innovation. Each state has its own iteration of Unauthorized Practice of Law (UPL) which bars non-legal businesses’ ability to provide affordable legal counsel. It also restricts non-lawyers from owning equity shares in law firms, thereby preventing meaningful technology partnerships and leaving law firms to scale hefty innovation efforts alone. 

By contrast, the United Kingdom and several countries in Asia allow non-law firms to offer legal advice at affordable rates. A few U.S. states—Utah, Minnesota, and Washington—have also relaxed regulations, with the chief goal being not innovation, but specifically innovation dedicated to democratizing access to legal information. 

Utah’s case is a particularly helpful model for how other states may follow suit. In 2020, the Utah Supreme Court voted unanimously to build the nation’s first “regulatory sandbox.” Regulatory sandboxes can be seen as an “oversight umbrella” that contains pilot programs — a sort of Shark Tank but, instead of gauging whether a company will make returns for investors, regulators evaluate whether a company will serve the public. 

Sandboxes are often case-by-case rather than one-size-fits-all, requiring firms to propose how regulations might be modified for their product. They find their roots in various forms of “flexible” and “responsive regulations,” championing strategies that encourage adaption, promote capacity building for all actors, and seek to attune regulators to the conditions of regulatees. 

The specific regulations relaxed or suspended by Utah’s Regulatory Sandbox include: 

• Ownership and Investment by Nonlawyers

• Unauthorized Practice of Law Restrictions

• Fee Sharing Between Lawyers and NonLawyers

• New Business Models Using Technology (AI) 

Utah regulators evaluate and accept companies into the sandbox under a risk calculus, closely monitoring how much harm and benefit they bring to consumers. The more potential risk of consumer harm, the tighter and stricter the performance data requirements. The more harm in practice, the less likely regulators will allow firm participation. Such data metrics are vital for informing future policy design and enabling proactive governance. 

In the first four years of Utah’s sandbox, the program has allowed for unprecedented investment in access-to-justice technologies from non-legal entities. The 2022 Activity Report claims that 47 entities were approved to offer services, 31,215 legal services were delivered by a lawyer or software with lawyer involvement, and 4,655 legal services were delivered by non-lawyers or software. After serving several thousands of individuals, consumer complaints to the Utah Office of Innovation have been statistically low—one complaint per 6,851 services delivered.

The regulatory changes have made space for new actors in legal services like Law on Call, the first non-lawyer-owned law firm in the U.S., and Rocket Lawyer, an AI model generating case-specific and affordable legal advice. 

Both companies took advantage of Utah’s regulatory flexibility and would not be allowed to legally operate in more than three-quarters of U.S. jurisdictions. Boundary conditions conceived by the controlled sandbox allowed these actors to commit more resources in anticipation of positive results. 

But as more states like Florida and North Carolina eye regulatory sandboxes, a troubling pattern arises. Should individual states adopt their own sandbox frameworks, significant differences will emerge in terms of eligibility criteria, safeguards, and oversight mechanisms. These discrepancies incentivize companies to “shop” for jurisdictions with the most lenient regulations. Consumers may find themselves caught in quicksand if regulatory sandboxes prioritize innovation over protection.

It follows that the best solution is scaling Utah's experiment nationally. In an Essay from the Georgia State University Law Review, Samuel Hoy Brown VII articulates a regulatory framework that can guide the success of a national regulatory sandbox. 

A "National Office of Legal Services Innovation" he recommends, should:

1. Establish a clear criteria for entities’ eligibility to participate 

2. Articulate the operating structure, authorities, rigorous data collection methods, and points of contact 

3. Create timing criteria for when entities may be admitted to the sandbox and how long it will last

4. Install safeguards such as background checks (especially for conflicts of interests, ie. those who have been disbarred) and minimum machine learning requirements 

5. Define a broader objective and structure for participating entities’ exit pathway 

   
   

Sandboxes should also incorporate ethical auditing as part of their testing process. Regulators would provide ongoing guidance during development, enabling early identification of risks such as algorithmic bias or legal liability issues. The iterative process would allow developers to make cost-effective compliance corrections before market deployment. 

American justice continues to come with a price tag that keeps solutions out of reach. Traditional solutions—pro bono work, nominal government funding—though laudable, have proved broadly insufficient. Utah's experiment demonstrates that the tools to bridge the justice gap exist. What remains lacking is the political will to scale and calibrate them beyond laboratory conditions. Until then, "Equal Justice Under Law" remains a promise written in disappearing ink.