Just a suggestion- but in my experience cheap paper cups degrade fairly fast (sometimes when you're still holding them!!) And you could improve their insulating quality by just using two or three inside each other. I know of a coffee place near me which took this route to stop using polystyrene.

I have an idea but the explaining of it might lose something in the translation . Here goes . After a roll of toilet paper is finished you still have a roll of cardboard . Make it flat (longways) and cut it about 3/4 of an inch to an inch at the end . Now turn it 180 degrees , flatten it again and cut again . Now most people know how to close a box by folding each flap down and the last one if forced under the first one . The end of your roll will be able to accept this method of closing . Do the same to the other end and you have a cylinder in which to put your worms AND it might feed them BUT will surely degrade in time .Not to mention that the middle of each end will allow a tiny amount of air to enter . If you are worried about them opening during transport you could make a paste with corn starch to hold the ends closed .
Hope I made this clear enough .

We have spent hours upon hours also looking for a biodegradable bait cup with no luck. The containers for soup and coffee would work, but they are expensive and the cover is plastic. We thought that we found the answer with the Bagasse (sugarcane byproduct) but in our experiments we had two problems. 1. the container absorbed the moisture out of the bedding. The container held up okay, but the worms started to dry out after a few days. 2. the cover would not stay on tightly enough. Has anyone found anything? Our best solution was to use a container that could be recycled and hope that the fisherpeople would do that. Our labels also ask them to recycle the container.

That would be great to find an economical way to package in a biodegradable container. One person I know suggested such a thing, since he was tired of finding all the styrofoam containers along the river banks.

I did notice that Vermico in Oregon, wants their independent growers to package in brown paper lunch sacks. You're supposed to fold the top down a few times and then staple it shut. Then you put it a shipping box. I would be concerned about the bag coming apart from the damp peatmoss while in transit. It must work for them. Maybe that would work for short term packaging. Has anyone tried this?

Larry