Free Market

Arizona Continues to Invite Innovation with Sandboxes

The Grand Canyon State, known for its captivating landscapes, is also a trailblazer when it comes to innovation. 

In 2018, following the United Kingdom’s lead, Representative Jeff Weninger championed House Bill 2434. This legislation brought regulatory sandboxes to the United States and targeted financial technologies (fintech).  

In 2019, Rep. Weninger didn’t slow down and brought to Arizona the country’s first and only property technology (proptech) regulatory sandbox, but what exactly is a regulatory sandbox? 

A regulatory sandbox allows for businesses, under the observation of regulators, to develop and offer new products, services, and business models while bypassing regulations unsuited for their innovative ideas. 

Continuing the trend, this year, Representative Steve Kaiser sponsored HB 2731, which expanded Arizona’s regulatory relief beyond fintech and proptech to include any and all industries – including those we haven’t yet thought of.  

The sandbox: 

  • Allows a company to offer its products or 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 Arizona Attorney General’s Offices by amending the existing fintech sandbox, which sets guidelines for the 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 the open market while also providing guidance to the 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 — the opportunity to innovate in all industries, it’ll be interesting to see what “next big thing” will come as a result of Arizona’s universal sandbox. 

Americans for Prosperity Arizona proved instrumental in ushering House Bill 2731 through their state legislature before receiving Governor Doug Ducey’s signature. 

Arizona continues to invite and promote innovation in their state, while helping innovative businesses avoid problematic, as well as outdated, regulations and joins Utah in operating a universal sandbox.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 Arizona. For groups or legislators in other states looking to work on the issue, we’d love to help!