Can legal Tech Survive ChatGPT?

The warning in the MIT report was blunt: ChatGPT was outperforming a specialized AI legal technology tool that cost thousands of dollars more.

A corporate lawyer at a mid-sized firm perfectly illustrates this.Her organization invested $50,000 in a specialized contract-analysis tool, yet she consistently defaulted to ChatGPT for drafting work, according to the report from MIT nanda, which is building infrastructure to support autonomous AI agents.

The July report highlights a real risk for legal technology companies: leaning into generative artificial intelligence while cheaper, general models continue to improve. Crunchbase estimates that about $2.2 billion in legal startup investment as 2024-roughly 80% of the total-has gone to AI-related companies.

This is an existential problem facing almost every software company in the AI era, including those making legal-specific tools. Can they differentiate themselves from widely available foundation models? the answer will substantially shape how lawyers work in the future.

To stay competitive, legal techs must do more than simply offer raw computing power-most already depend on the big foundation models for core functionality. They need to make their tools easier to use than general models and specifically tailor them for legal teams. Otherwise, they risk having their functions duplicated by the major AI companies, much like Apple has integrated features into iPhones and Macs that were previously third-party apps. iPhone users no longer need to download a call-recording app, for example, now that Apple offers that feature standard.

Daniel van Binsbergen, CEO of contract tech startup DraftPilot, believes the odds are stacked against legal tech companies trying to outperform top AI models purely on AI capabilities. “The changes they’re making seem to lift quality in medicine, in law, in all of these disciplines,” he said.

A Tight Race?

Early comparisons show legal-specific AI facing a tough fight to surpass general-purpose tools.

In one study, an OpenAI model led to bigger improvements in the clarity of some legal writing.