Creating another layer of bureaucracy, even when covered in the veneer of startup tech, can definitely make things worse. Here are some open questions that may show how that's possible:

* What will happen if nefarious actors discover how to hack or game this system? Will you be able to pay the mob to get hacked out of jail?

* On the flip-side, could a nefarious actor put you in the penal system, or at least make it look like you were arrested?

* What protections are there around malfeasance within the company? Parole officers are public employees, but what's the liability within a LLC?