Free Enterprise

Kentucky Goes All-In on Sandboxes

The Bluegrass State, a state known for its horse racing, continues to blaze a trail for innovation. 

After Arizona passed the country’s first financial technologies (fintech) regulatory sandbox in 2018, Representative Bart Rowland carried House Bill 386 across the finish line in 2019 to bring the United States its first insurance sandbox

A regulatory sandbox allows businesses, under the observation of regulators, to develop and offer new products, services, and business models while receiving a temporary waiver of regulations inapplicable to their innovative ideas. 

Continuing this trend, this year, Representative Phillip Pratt sponsored House Bill 264, which expanded Kentucky’s regulatory relief beyond insurance to include any and all industries—including those we haven’t thought of. 

The sandbox:

  • allows a company to offer its products and services in a controlled environment temporarily; 
  • requires that the company remain transparent to the consumer in an effort to inform them of the services they are exploring; 
  • provides controls for entry and exit from the sandbox so consumers aren’t left high and dry; 
  • establishes the universal sandbox in the Kentucky Attorney General’s Office, which sets guidelines for participants, as well as grants or denies entrance into the sandbox. 

If the trial is a success, the sandbox offers a path forward for the company to enter into the open market while also providing guidance to the Kentucky Attorney General’s Office on which regulations require reform or even repeal. 

The sandbox benefits both new and existing businesses. By providing businesses—both big and small, old and new—the opportunity to innovate in all industries, it’ll be interesting to see what “next big thing” will come as a result of Kentucky’s universal sandbox. 

The National Federation of Independent Businesses Kentucky proved instrumental in ushering House Bill 264 through their state before passing into law. Kentucky continues to invite and promote innovation in their state while helping innovative businesses avoid problematic, as well as outdated, regulations. The Bluegrass State joins Arizona and Utah in operating a universal sandbox. 

Regulatory sandboxes are an issue that Libertas Institute has researched extensively, and we stand ready to help your state pursue this opportunity as we have with Kentucky. For groups or legislators in other states looking to work on this issue, we’d love to help