All I want for Christmas is…an AI lawyer.

Actually, wait—your AI lawyer has a year-end and New Year sale.

Happy holidays! This is a contemplative time of year, and it’s a year that made many people rethink a lot of things. Yes, it seems like things suck. But that’s just because our expectations are so high. If you’re reading this, chances are you’re in the 5% for wealth and quality of life, globally. You have an ingrained expectation that the system will work for you and, barring some personal or communal tragedy, things always work out. With so many norms being challenged—and expectations about how things are supposed to be (from tech to Hollywood to government to global alliances) getting tested—it’s no surprise the mood is malaise and uncertainty. And when the federal government looks inept while pursuing cruel policies in the name of renewed “greatness” (and yelling at us when we question whether this really is so great), it’s easy to think we’ve lost our way. But I disagree.

What’s happening is a reset. Yes, it’s painful. But once you understand there is a basic yearning for something new and different, it’s liberating. Try to reimagine all the things that suck and reject old frameworks and tired theories. And then layer in AI, which for all its flaws is a pretty cool technology that can turbocharge your ideas if you know how to use it. My prediction: 2026 is going to be rocky, but pretty awesome!

Personally, I spend a lot of time both practicing law and thinking about the business of the law. I also have many clients in different professions: medicine, architecture, communications, software development, etc. So I think a lot about how we regulate these industries today, and what the future holds.

These days, those avocations (and many more) are more businesses than professions. Interestingly, many have retained some of the aspects of a profession—namely, the ones that benefit the professionals. Medicine, law, architecture, and, to a lesser extent, software development are “credentialed.” The basic premise is that only human beings with certain licenses can collect fees from the performance of a professional service. From one perspective, it’s a consumer protection mechanism to assure quality (I like the fact that my doctor has a license). But seen another way, it’s a protectionist racket that leads to less supply of the services, and therefore higher prices and less choice.

Certainly, there is a world where we don’t license and we assure quality on the back end via lawsuits. Some dude claiming to be a doctor treats you and causes harm; you can sue. That would place the risk in the appropriate places. But the societal costs of that are huge, so licensing probably does serve some important purpose in that regard. And since only experienced and personally invested humans could do most of these professions, allowing those well-credentialed professionals to have a monopoly on the practice of those services also seems fair, even if it resulted in higher costs and less choice.

In the past, there were few other options for providing professional services —often the most creative we got was allowing for multi-state licensing, so you could choose a professional licensed in another state. But these laws are so restrictive that even that option was limited. The biggest innovation in the stodgy world of professional services happened about 30 years ago, when we decided to “platform” professional services. Now, consumers can find a professional services provider and judge quality based on reviews from other users, or just compare providers to others. Every profession has them—ZocDoc for doctors, UpCounsel (and 10 others) for lawyers, Houzz for interior designers, Headway for therapy, etc., etc. I’m not counting the platforms for non-professional services like taxis (Uber/Lyft) or handypersons (TaskRabbit/Angi’s List). I’ll return to the latter later.

I have a few platform clients, so I understand their business model—and the regulations surrounding them—pretty well. The premise of platforming is that the professional pays for access to customers. The platforms do the user acquisition, and the professional pays for the leads.

The biggest limitation on the platform business is that, for the most part, the platform can’t take a percentage of the fees that the professional earns. That is because most states have prohibitions on professionals “fee sharing” with non-professionals. It means that profits from providing the professional services can only be paid to other professionals with that license. For credentialed/professional services, the platform is an interactive billboard. Professional services have it easy. Compare that to, say, Uber and TaskRabbit, where there are no prohibitions on fee sharing. For the non-credentialed, the platform gleefully takes a (large) percentage of the fees from the worker. For non-credentialed/professional services, the platform is a plantation. A topic for another newsletter.

Remember how I said before that all this credentialing was sort of a victimless crime because only humans could provide the professional services, and we really had no choice but to pay more for a limited choice of highly qualified professionals? With artificial intelligence (and the promise of artificial general intelligence), that is not true anymore. Yes, it’s very possible that at some point in 2026 or 2027, an AI lawyer, doctor, architect, or therapist would be as capable as their credentialed human counterpart (but not as competent as this semi-well-credentialed lawyer, of course).

Enter those same fee-sharing rules, which also prevent non-professionals from having equity in professional services organizations. It means that only lawyers can own law practices, doctors can own medical practices, architects can own architecture firms, etc. Who can’t own those professional service organizations? Corporations. Corporations are owned by shareholders, and send profits to shareholders. Those shareholders are not licensed professionals. Hence, you don’t see a lot of capital being poured into building synthetic/artificial intelligence professionals like lawyers, doctors, and architects. The model does not work from a regulatory perspective. You can build tools for those professions—and boy, do they build and try to sell AI tools to lawyers—but you can’t build a customer-facing product that performs the professional service.

I suppose that a group of lawyers, doctors, architects, etc. come together to build an AI version of their service and sell it directly to clients (lawyers call this the “new model”), but the problem is that it’s super expensive to build and market, and there are still geographic limitations. It’s a typical innovator’s dilemma: You’re better off just providing the service you have a monopoly on (or you’re just really good at) than spending your money building a new service that will probably earn you the same (or not work at all).

But some of those new model professional service organizations might break through. Or we may change the fee-sharing rules—Arizona, for example, recently allowed fee splitting. But the catch is that you can only provide professional services in Arizona. Maybe more states will follow. It would be nice to see the costs of professional services come down, even if it means that professionals like me will have more competition. Don’t worry, I’ll be fine. I already have a new model firm set up, even if the functionality and the legality are dubious.

Short of the fee-sharing prohibitions going away—which would make most professionals employees of corporations owned by outside investors (for better or worse)—the most promising method of fee splitting is the “managed service organization.” I’ve created a few of these for my clients. The idea is that the professional service is provided by the licensed professional, but all the profits are funneled to a servicing entity with outside investors. Technically, the MSO is being paid to provide back-office services (which include things like marketing and technology). They charge a lot. And they are owned by the professional and the outside investor. In the legal space, a few large firms are working on this model.

At the extreme, the new-model law firms, at least the smart ones, are positioning themselves as lawyers but with an MSO with outside investors providing technology. And because the customers are coming for the technology, it’s totally acceptable if the lawyers pay most of those profits from legal service over to the MSO for its “managed services.” These models are a promising workaround to the fee-splitting prohibitions. crosby.ai and paralex.ai use this model. As with many new technologies, we don’t know the legality of this. As we often do in tech, we hope that by the time the law catches up, the new-model firms will be so well established that they can bend the regulations. We shall see.

Where things get really interesting is the licensing requirements for the lawyers, doctors, and architects who do the AI-enabled review. Do they need to be licensed in the place where the client asking for the service is located? We really don’t know, although I am pretty sure that the professionals doing the human review are probably out of compliance if they are reviewing documents and providing legal advice to clients with no nexus to the location of the professionals’ licensure. But if they are in India or the Philippines, will they ever be sanctioned? Probably not. And while we’re at it, why don’t we completely offshore our professional services providers? With AI, it’s possible. Perhaps we’re watching the wrong border. Again, this is a reset. It’s all up for grabs. I’m here for it.

This is the final post of Fractionally Legal in 2025. The future is, as always, constant—but not consistent. Still, we’re all on this ride together. On to 2026.

I’m looking forward to the interesting times (and the interesting topics) ahead. And if there’s anything I can do to make your legal life a little easier, I’m always happy to help.

That last bit was attorney advertising. Yes, compliance is still a thing.

Keep thinking, keep building,

Jesse

Hi, and welcome to my newsletter! I’m Jesse Strauss, Your Fractional General Counsel. I’m a lawyer with a private practice based in New York City, helping clients in the United States and globally with their U.S. legal needs. My expertise spans various areas, including raising funding rounds, employment issues, negotiating master service agreements, intellectual property, compliance, legal process management, and dispute resolution. My focus is on founding and nurturing great companies from seed to exit. Discover more at Your Fractional GC and book a complimentary 30-minute consultation. You can also follow me on Threads @lawyerjesse1977, on BlueSky @lawyerjesse.bsky.social, subscribe to my Substack here (follow me on notes), and follow me on LinkedIn here.