State Senator Anna Wishart proposes regulatory sandbox for Nebraska startups

State Senator Anna Wishart proposes regulatory sandbox for Nebraska startups

Nebraska state Sen. Anna Wishart has introduced a bill to make Nebraska a more inviting state for innovative entrepreneurs and startups. LB1127 would establish what is known as an industry agnostic or all-inclusive regulatory sandbox in Nebraska.

What is a regulatory sandbox, and how does it work?

Regulatory sandboxes are gaining momentum in many industries, particularly the financial, legal, and technology industries. They provide a temporary space for entrepreneurs to develop a new product or service under some degree of regulatory supervision, but without potentially excessive regulatory burden and penalties. The goal is to allow startups to “play” in the sandbox and potentially alert regulators when existing rules may need to be re-examined and either repealed or revised.

Sandboxes may be industry-specific (fintech, insurance, health care, or agriculture, for example) or all-inclusive. They may be housed in the Attorney General’s office, a commerce or economic development department, or a specific department that correlates with an industry.

Firms participating in the sandbox can run a trial of their business concept if consumer protections, such as freedom from deceptive practices and right to privacy, are maintained. Firms are typically required to compensate consumers should harm arise.

Why propose a sandbox?

In the startup culture, entrepreneurs are proposing goods and services to solve problems and meet consumer needs. Often, their proposed ideas and business models do not currently exist. Technology advances quickly, and regulators cannot always keep up with the changes. The current regulatory framework can prevent entrepreneurs from getting started with a new idea either because regulation prohibits an innovation, or because the rules are not clear.

History and legislation in other states

The first regulatory sandbox was launched in the United Kingdom, and interest has spread worldwide. Arizona adopted the first U.S. sandbox, for fintech, in 2018. The Arizona Attorney General’s office played a role in establishing the sandbox and currently oversees it. Utah passed the nation’s first all-inclusive sandbox in March of 2021, with North Carolina following in October 2021. The result is that entrepreneurs and major investors are showing more interest in those states and taking advantage of the opportunities provided by regulatory sandboxes.  As more states establish sandboxes, participants from existing states are looking to expand their business models to the new states.

Currently, 12 states, including two of Nebraska’s neighbors have regulatory sandboxes of varying types. These states include Arizona, California, Florida, Hawaii, Kentucky, Nevada, North Carolina, South Dakota, Utah, Vermont, West Virginia, and Wyoming. South Dakota adopted an insurance sandbox in 2021, and Wyoming adopted a fintech sandbox proposal in 2019.

The Platte Institute strongly supports Sen. Wishart’s efforts to make Nebraska competitive in the startup market and for her willingness to propose the establishment of an all-inclusive regulatory sandbox to help entrepreneurs turn their ideas into a reality. LB1127 is an example of legislation that strengthens Blueprint Nebraska initiatives to make our state an economic leader among its peers.

You can contact your state senator about LB1127 at the link below.

LB1127: Adopt the Regulatory Sandbox Act

Photo Courtesy Nebraska Unicameral Information Office 

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