Collective Bet

Maxwell Strachan of Vice writes about Ryval, which is a startup that seeks to allow its users to fund lawsuits. Strachan writes:

A new tech startup plans to become “the stock market of litigation financing” by allowing everyday Americans to bet on civil lawsuits through the purchase (and trade) of associated crypto tokens. In doing so, the company hopes to provide funding to individuals who would otherwise not be able to pursue claims.

Ryval allows its users to purchase tokens to fund lawsuits. Strachan succinctly describes Ryval as a “crypto-infused and lawsuit-focused GoFundMe.”

Kyle Roche, one of the founders of Ryval, states that its goal is to “make access to justice more affordable.” Strachan contrasts Roche’s claim by proposing that Ryval’s website appears to instead prioritize the potential returns for investors.

Empowering everyday people to leverage the judicial system is a worthwhile cause. It is not uncommon for people with valid claims to walk away harmed because of a lack of knowledge or resources. For example, we all likely know someone who has had a valid warranty claim denied for something like an electronic device or motor vehicle. The idea of empowering David against the Goliaths who have continually avoided accountability due to resource imbalance is exciting, righteous, and popular.

That said, as Strachan points out, litigation financing is nothing new. A well-known instance involved Peter Thiel funding Hulk Hogan’s lawsuit against Gawker Media. In fact, Legalist is a litigation financing organization that received funding from the Thiel Foundation.

What makes Ryval’s proposal on litigation financing different is crypto. Ryval states the advantage from crypto is that it lowers the barriers to leverage the judicial system. In doing so, more people can participate in the judicial system by purchasing tokens. These tokens can be redeemed for a potential windfall at the end of litigation. Token owners may also buy and sell them during a case at a price of their choosing.

With this democratization, I can immediately think of two concerns. First, a noted criticism of litigation financing generally is that it may result in more cases, clogging up an already clogged judicial system. While a practical criticism, if the system becomes infused with cases from vulnerable populations with valid claims, this scenario appears worthwhile. Justice should be accessible to all, particularly those whose legitimate claims have been continually ignored because of their lack of resources. The other concern is particularly noteworthy. Unaccredited investors are at a significant disadvantage compared to accredited investors due to a one-year lockup period. If Ryval’s goal is to democratize access to the courts, invigorate interest in the judicial system, and hold the previously unaccountable accountable, that pursuit is meaningful and likely without controversy. However, should Ryval truly intend to leverage its platform to create a betting market as Strachan suggests, this one-year lockup period puts unaccredited investors at a significant disadvantage. A party's chance at success can significantly change within a year. Summary judgment may even be granted before a year, ending the case entirely, and leaving unaccredited investors stuck holding the bag. This result may only highlight and exacerbate the accredited versus unaccredited investor divide, which is counter to Ryval’s goal.

Setting aside these above concerns and Ryval’s positioning of litigation financing as a betting ring, the concept itself is interesting. It’s like a litigation focused Goldfinch in that it shares a story, vets it, leverages crypto for crowdfunding, and distributes the funds to the parties. Perhaps the true takeaway is that Ryval continues the march towards a popular Web3 goal: the capability to financially organize around almost anything. Although an initiative towards the decentralization of the web, Web3 empowers individuals into collective action. I look forward to reading more about these initiatives and their outcomes. The web is exciting again.