What Will Be The GameStop Of The Legal World?

Consumers blew up Wall Street; will their next stop be the courthouse?

(Photo by Michael M. Santiago/Getty Images)

Where were you when the masses combined forces online to “meme” hedge funds out of billions of dollars? If you’ve been remotely tuned into the cultural conversation the past few weeks, you’re aware that Reddit drove the price of GameStop shares halfway to the moon. If you somehow don’t know what I’m talking about, grab your popcorn and read one of the many, many explainers available online. Once you’re caught up, let’s discuss what GameStop could portend for the coming years in the legal system.

Like A Horde of Locusts With Brokerage Accounts

I see the GameStop story as primarily one about what happens when we combine broadening public access to a service with unexpectedly effective coordination of the public’s attention. The New York Stock Exchange was founded in 1792, but it wasn’t until internet access became ubiquitous in the mid-90s that everyday Americans started to have the ability to meaningfully engage in the stock market. While early pioneers such as E*TRADE and TD Ameritrade are still around, they remained largely desktop-based platforms.

At the epicenter of the GameStop mania is a company called Robinhood. Robinhood is designed to be a visually appealing, phone-based experience, incorporating ease-of-use for newbies and robust analytics for the wonkier set. Rather than charging for trades like most other brokers, it lets users trade stocks and options without any fees, instead following the Facebook model of monetizing users’ data. The formula is a hit. As the pandemic kept young adults home, leaving them with ample free time and disposable income, Robinhood experienced massive userbase growth. Stock trading had become available to the masses on an entirely new scale.

What no one expected to happen was for those millions of new investors to all start working together. The stock market generally works on the assumption that its participants are “rational actors” making independent decisions. But GameStop has shown us how malleable that decision-making process can be. A few trusted names on an influential subreddit posted a strong argument that GameStop was ripe for a short squeeze. The newly empowered Robinhood investors bought that analysis, and then bought the stock itself en masse. They materially moved the market, hedge funds took billions in losses, and the retail investors celebrated their new riches.

But that was not the end of the story. As I write this piece, GameStop’s stock price is predictably coming back down to earth, and many of the retail investors who jumped in on the upward spike are now facing significant losses. Robinhood is facing a class-action lawsuit for allegedly preventing users from continuing to drive GameStop’s share price higher. Even with millions of new players, the basic game of the stock market remains unchanged. Some investors win and some lose. What’s fundamentally changed, however, is the number of everyday people involved, and the recognition of the massive power those folks can have if they work together.

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What It Means For Us

I and many others have written about the unconscionable difficulty many individuals have with getting access to legal representation, or even basic justice. Lawyers are expensive, and many people can’t scrape together the funds for an hour of legal consultation, much less a retainer for full representation of their rights. This has been a long-standing, endemic problem in our industry, and it’s one we’re only just now starting to make concerted efforts to address. Some states, including Arizona and Utah, have begun experimenting with alternative forms of legal representation designed to get more innovation and legal services into the system, in hopes of creating new, more affordable models of legal assistance.

Although increasing access to the legal system is a good thing, we need to plan for the unexpected ways those everyday people can spontaneously coordinate their actions and place unimaginable stress on our systems. Specifically, what happens when the Robinhood of legal services comes along, and filing a lawsuit becomes a trivial task that can be accomplished during a bathroom break? Because that app may already be here.

The Horde Hits The Courthouse

Imagine that an influential Redditor posts an argument that ABC Corp. has caused millions of individuals some tiny degree of legally compensable harm. In the old days, getting that harm addressed would have required a team of class-action attorneys to gamble their time and resources on a single large lawsuit, which ABC Corp. could have defended with its own team of lawyers and eventually settled. But say the Redditor who posts their analysis also posts a link to the DoNotPay app, which I’ve profiled previously, and notes how simple it can be to file a small claims lawsuit against ABC Corp. if you just pull your local court’s forms off the app. The DoNotPay concept itself is groundbreaking, so much so that famed Silicon Valley investor Peter Thiel jumped on board. But what happens when, instead of one unwieldly class-action case in a single court, hundreds of thousands of small claims cases can be filed in a few days across the nation against a single defendant?

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At first glance, one could argue this would be a David-and-Goliath moment, another opportunity for the traditionally powerless to flex their collective muscle. And it may well be for people who’ve suffered genuine harm that would previously go without redress. But the answer may not be that simple –– particularly if an unscrupulous or misguided Redditor targets a business with a meritless theory or claim. Many of our lower court systems are already taxed to their limits and couldn’t handle thousands of new cases flooding in over a week or two. Many defendants, for that matter, would be bankrupted just trying to review and answer the cases filed against them, much less substantively litigate them. But those costs are only huge for the institutional actors. The retail-level litigant gets to join in the fun of taking down an internet villain for the low cost of a small claims filing fee and process server.

Whether it’s stock trading or advocating for one’s legal rights, increasing access for the everyday user is going to be an overall gain for society. The internet’s fundamental strengths are its ability to facilitate the exchange of ideas, help people do things they couldn’t previously do, and coordinate efforts in new ways. If you’ve got a great idea for a project, you can pitch it and get funding on Kickstarter. If you want to support a worthy cause, you can launch a GoFundMe page. Individuals have incredible power when they work together toward common goals, and the internet makes that easier than it’s ever been in human history.

What we need to prepare for as an industry is when that massive strength comes to bear on us or is used in unexpected ways.

The experiments in increasing public access to the legal system should without question continue and be vigorously pursued. There is little doubt much good will come from it. But post-GameStop, we must stop to think through the unintended uses of that newfound power to make sure we account for it in a way that is a benefit to all of society and fulfills the objectives of regulatory reform.


James Goodnow is the CEO and managing partner of NLJ 250 firm Fennemore Craig. At age 36, he became the youngest known chief executive of a large law firm in the U.S. He holds his JD from Harvard Law School and dual business management certificates from MIT. He’s currently attending the Cambridge University Judge Business School (U.K.), where he’s working toward a master’s degree in entrepreneurship. James is the co-author of Motivating Millennials, which hit number one on Amazon in the business management new release category. You can connect with James on Twitter (@JamesGoodnow) or by emailing him at James@JamesGoodnow.com.

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