Litigation finance will soon be a $50 billion global industry, yet most people haven't heard a thing about it.

At its core, litigation financing, also known as litigation funding, is when some party to a lawsuit is given funding in exchange for a piece of whatever money is recovered. The reason litigation funding exists is because some lawsuits are remarkably expensive to litigate. Without litigation funding, a law firm wouldn't have the resources to pursue the claim.

Even though the litigation finance makes it possible for the lawsuit to happen, the decision-making stays in the hands of the lawyers. They still decide all of the strategic and legal aspects of the suit, including whether to settle or go to trial,

One way of looking at litigation finance is that it's a bit like funding for startups. The investor believes they are investing in something with a lot of potential that fits their thesis of investing in things with the greatest possible multiple return on their investment. So, in litigation finance, just as in startup investment, the investor is swinging for the fences.

Paul Lagnese, a Pittsburgh lawyer, points out that litigation finance is an important strategic tool:

"Litigation finance can be a tool to help individuals and small business owners who have limited resources obtain access to the civil justice system. It allows meritorious claims to be pursued that would not otherwise be brought without the resources litigation finance makes available. Stated another way It provides people and small business owners who have been wronged to fight companies and individuals with very deep pockets."

As we think about the natural evolution of litigation finance, it would seem like a logical move for the largest and most powerful litigation finance firms to own their own law firms. The one piece of the equation they can't control now is the success of the case in which they're investing. And while they would never be able to fully control this variable, actually owning the law firms seems like a smart move.

This doesn't really introduce a lot more risk into the process, as the business of Big Law can be very lucrative. And while it would still be the litigation financing form actually financing these cases, by being able to exercise control over the law firm, the litigation finance firm couldn't make critically important decisions, such as which cases to prioritize and put the highest audits resources into.

But through ABS (alternative business structures, which allows for nonlawyers to own law firms) litigation finance companies could have more control over the process but owning the firm that takes these cases. This is what is beginning to unfold in the U.S., with states such as Arizona loosening rules about who can own law firms.

In November, the can of worms about who should be able to own a law firm really began to open. In 2020, Arizona drew the legal eyes of the nation when it eliminated its ethics rule barring nonlawyers from having any ownership interest in a law firm of legal service operation. The state needs to approve any company taking place in their alternative business structure program. One of the 12 companies given approval in 2021 was LZ Legal Services, part of the online consumer and business law giant LegalZoom.

For those few people who have never heard of LegalZoom, they provide do-it-yourself services as well as attorney services to help individuals and businesses. So that's one prong. They understand the law really well, they have their finger on the pulse of what consumers want for legal services, and they are probably significantly experienced and skilled at this point to be able to influence consumer demand for legal services.

But what about the money piece? Well, they're raised close to a billion dollars over the years to help grow their own business and they've gone through an IPO. It would not take a great leap of faith to imagine that LegalZoom's funders might like to dive into the litigation finance game through a vehicle owned and operated by LegalZoom. With $200 million in annual revenue, LegalZoom has proven that they have found some cracks in the legal business model that they have inserted themselves into. So why not law firm ownership to act as their own litigation funder?

Not everyone agrees that LegalZoom is a great fit for the litigation finance space. Law professor, consultant and author Mitch Kowalski argues that:

"LegalZoom's business model is currently based on volume solicitor work—trial work is pretty far outside their sweet spot, as would funding trial work. I think they'd be as interested in litigation funding as Ford is in making motorcycles."

Almost a decade ago, legal scholars hypothesized as to the future of LegalZoom, wondering out loud whether they were a provider of legal firms of a lawyer in sheep's clothing. The next level of that analysis is happening today, with LegalZoom as the perfect exemplar of the potential future of litigation finance. Where this all ends up is going to be remarkably interesting to follow over the next weeks, months and even years.

Aron Solomon is the chief legal analyst for Esquire Digital and the editor of Today's Esquire. He has taught entrepreneurship at McGill University and the University of Pennsylvania, and was elected to Fastcase 50, recognizing the top 50 legal innovators in the world. Aron has been featured in CBS News, CNBC, USA Today, ESPN, TechCrunch, The Hill, BuzzFeed, Fortune, Venture Beat, The Independent, Fortune China, Yahoo, ABA Journal, Law.com, The Boston Globe, NewsBreak, and many other leading publications.