Written by Matt Levine

Full Piece in Bloomberg

Two things that Americans, and Money Stuff, love are financial capitalism and litigation. An important mechanism of American life is that, if someone does something bad to you, that automatically creates an asset: If I punch you in the face, or post mean things about you on the internet, or poison your town’s drinking water, you become the owner of a financial asset, and I incur an offsetting liability. Because you can sue me, you probably will, and your lawsuit might result in you getting money from me.

…

Traditionally the first approach was the only approach — selling lawsuits was historically frowned upon — but we really do love financial capitalism and that situation couldn’t last. Now “litigation finance” is a big business, and a big asset class; plaintiffs and law firms get money upfront from investors in exchange for a share of their possible eventual winnings. One way to analyze this is that it is expensive but socially valuable for class-action lawyers to bring mass tort cases (I poisoned your town’s drinking water, I invented OxyContin, etc.), and selling off a portion of the prospective recovery is a way for them to finance their cases, remedy injustice and deter wrongdoing. Another way to analyze it is, look, I got punched in the face, I have an asset, markets ought to be complete, why shouldn’t I be able to sell my asset?

I’m a little bit kidding about being punched in the face, which is too small-stakes for litigation finance, but in mass torts and business disputes litigation finance is a growing asset class. And markets tend toward completeness and tokenization and all-to-all electronic trading, so obviously in the fullness of time you should expect lawsuit claims to trade on an electronic exchange so you can buy and sell them in your Robinhood app or whatever.

…

It is fun to imagine what a truly complete and liquid market in litigation claims would look like. Like, as soon as I punched you in the face, you could take a picture of your black eye, upload it to your brokerage app, and sell your claim in minutes. Or more broadly what if there were public real-time market prices for every lawsuit? (Or at least, for some mass tort lawsuits and high-profile commercial disputes?) Why bother with the trial? “I see our lawsuit is trading at a market capitalization of $15 million, want to settle for that right now?”