Regulatory Changes Enabling Law Firm 2.0

Law Firm 2.0 is being powered by regulatory reform and rapid advances in technology. Regulatory changes are allowing non-lawyer ownership and automated legal services, unlocking capital and infrastructure to reimagine how legal services are delivered. 

At the same time, AI and automation enable these new models to scale efficiently by handling complex tasks, reducing costs, and improving accessibility. Together, these forces are reshaping legal services for a more innovative and inclusive future of law.

New Rules, New Players

Following the UK’s deregulation over a decade ago, regulatory innovation in the U.S. is gaining momentum. Arizona and Utah now allow non-lawyer ownership, giving firms access to outside capital and enabling scalable, tech-enabled models. Indiana, Minnesota, and Washington are preparing to launch similar sandboxes, allowing non-lawyer providers and entities owned in whole or part by non-lawyers to offer legal services.

New roles are also reshaping service delivery. Colorado, Oregon, and New Hampshire are licensing paraprofessionals, non-lawyer providers similar to physician assistants. Alaska, Delaware, and Hawaii have introduced “community justice workers,” enabling legal aid and community-based organizations to train and supervise non-lawyers to deliver limited legal help.

FIGURE 1: Landscape of Regulatory Innovation 

This map shows how states across the U.S. are experimenting with regulatory reform in three key areas: new roles for non-lawyer legal service providers (blue), community justice workers (CJWs) (green), and new legal service entities (red).¹ 

In May 2025, the UK’s Solicitors Regulation Authority approved Garfield AI as the first fully automated law firm, using software to handle claims under £10,000.

These reforms are laying the groundwork for Law Firm 2.0, where firms prioritize product, outcomes, and accessibility over traditional models.

¹  Source: Stanford Legal Innovation Report 

From Billable Hours To Business Models

Alternative business structures (ABSs) are testing pricing models that prioritize value and predictability. Arizona has 21 flat-fee firms and 6 that bundle tax or accounting services. Utah counts 4 flat-fee firms and 4 subscription-based entities, and 4 that offer free services to low-income clients. In 2022, nearly half of approved entities in both Arizona and Utah launched with flat or subscription pricing. These experiments signal a shift beyond the billable hour toward predictable, client-friendly pricing.

Lawyers Still Lead

Despite fears of being replaced, lawyers remain central. Over 80% of ABS and sandbox entities include lawyers in leadership or client-facing roles. Tech-first firms still require legal oversight to meet professional standards. Software may power the delivery, but lawyers anchor trust, compliance, and ethics.

Access, At Scale

Cost is the main barrier to accessing legal services. 92% of low-income legal needs in the U.S. go unmet. New business models are changing that. In Utah, underserved communities are accessing legal services for the first time. Most entities target consumers (116 of 136 in Arizona; 10 of 11 in Utah), with a smaller slice serving small and mid-sized businesses (32 in Arizona; 3 in Utah). Very few cater solely to law firms (13 in Arizona; none in Utah) or big corporations (27 in Arizona; 1 in Utah). 

New regulatory frameworks enable mission-driven models that deliver affordable legal services, without sacrificing scale or quality. Utah led with 39 approved entities in 2022. Arizona now counts 136 across nearly every practice area. The gap is closing fast, with just two areas still underserved, landlord-tenant and healthcare. Momentum is building across both states, and the diversity of models is growing with it. 

Reform Without Risk

Regulators are watching outcomes. Utah reports only 20 complaints as of April 2025, one per 5,800 services. Arizona has only issued two disciplinary actions. Both firms cooperated, remediated swiftly and caused minimal client harm. These early results show that it’s possible to modernize law without compromising consumer protection. 

The Infrastructure to Power Future Legal Services

Law Firm 2.0 startups are building tools that deliver compliant, efficient legal processes at scale, including:

Under traditional structures, this level of automation risked non-compliance. Today’s evolving regulations make these innovations possible.

Join the Future of Legal Services

Law Firm 2.0 is live, licensed, and scaling in jurisdictions willing to regulate based on outcomes. The result is a dynamic legal sector that is competitive, automated, and responsive to client needs.

For founders, operators, and investors, regulatory reform is a launchpad. The most transformative legal businesses of the next decade will be built because of these new rules.

At The LegalTech Lab, we back founders building AI-native legal services, modern law firms, and the infrastructure powering the next generation of legal work.

Apply now our Law Firm 2.0 accelerator. Let’s build the future of law—together.

Continue reading: The $1 Trillion Opportunity: Building Law Firm 2.0

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About The LegalTech Fund We invest in companies transforming the world of law. This article is put together by the team at The LegalTech Fund. 

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