For several years, Bloomberg Businessweek has tracked the rise of “litigation finance,” a niche market where hedge funds invest in lawsuits. Today litigation finance moved in a new direction with the launch of LexShares, a crowdsourcing website backed by Atlas Ventures.
Marketed as a populist courtroom ally, LexShares will “provide plaintiffs with equal access to justice and investors with access to a new asset class that is not correlated with broader capital markets,” according to Jay Greenberg, co-founder and chief executive. Note, however, that what sounds like a splendid win-win proposition, sweetened by social-media pixie dust, will not deliver happy news for everyone. Litigation finance inevitably encourages more lawsuits, presumably with deep-pocketed corporations as the targets. And turning litigation into a vehicle for third-party speculation—er, I mean, investment—raises potentially sticky questions about potential conflicts between clients’ interests and those of outside funders looking to maximize returns.