Georgia Gains by Playing in a Regulatory ‘Sandbox’

With technology and innovation at the heart of American Greatness, it should come as little surprise that in a recent report of the 50 most innovative companies in the world, the United  States was home to the overwhelming majority of companies.

While a historically light-touch approach to handling technology has been a major driver in this country’s success, the government may be failing to live up lately to its promise of offering a welcome mat to innovative entrepreneurs.

Regulations, created through either legislation or rulemaking, are supposed to exist to protect public health, safety and financial well-being. Yet regulations, while well intentioned, often make it more difficult for businesses and the government to be responsive to immediate issues during an emergency. For example, to fight the COVID-19 pandemic, federal, state and local governments waived 846 regulations.

With the regulations waived, the sky did not fall and consumers were not left worse for wear. So  it is reasonable to wonder why these rules were on the books to begin with. It becomes apparent that some regulations exist under the veil of consumer protection while they truly serve as  an artificial barrier to entry.

Looking back through history, there are numerous examples of regulations preventing innovative companies from pushing the edge of what is possible. From Uber and its battle against the taxicab industry and regulators, to Tesla’s battles to sell its vehicles without a traditional dealership model, the notion that the country is business-friendly does not necessarily hold up.

The increasingly precautionary approach to regulation is causing some serious problems, and it is forcing this country to acquiesce its dominance in some industries to other countries.

It is not just the federal government impeding the way for companies to innovate. Countless state laws might make it harder for businesses to be in the best position to be successful. There are approximately 109,000 restrictions in Georgia and 6 million words; it would take an individual some 334 hours to read through all of Georgia’s regulations.

Given the exponential growth that technological advancements offer to reshape industries, it is important that the government and the Legislature adopt a regulatory framework that is agile and can adjust with the changing times. That is where an opportunity “sandbox” comes in.

A regulatory sandbox is an administrative framework that allows businesses and government to work hand-in-hand to identify problematic regulations and temporarily suspend their enforcement in order for a business to offer a product or service to consumers under the watchful eye of a regulator.

The concept originated in the United Kingdom in 2014: “Project Innovate” was designed to come up with more appropriate regulations for financial technology companies. The program was wildly successful, with more than 700 participants since its inception. The policy gained traction and was adopted across many other countries around the globe, including the United States.

Arizona became the first state in 2018 to pass a FinTech sandbox. Wyoming, Nevada, Florida and others have since implemented regulatory sandbox programs of their own. The concept has expanded beyond financial technology companies, too. For example, Utah created the nation’s first legal services sandbox, which aims to increase access to the legal system to poor Utahns.

These regulatory sandboxes send a signal to companies that states welcome innovation and want businesses to set up shop there. Rather than try to stop businesses from doing new and innovative things, the state should identify ways it can encourage businesses to redefine what is possible. Georgia should join the states playing in the sandbox!

This commentary was written for the Georgia Public Policy Foundation by the Libertas Institute, a non-profit organization based in Utah. Established in 1991, the Georgia Public Policy Foundation is a trusted, independent resource for voters and elected officials. The Foundation provides actionable solutions to real-life problems by bringing people together. Nothing written here is to be construed as necessarily reflecting the views of the Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.

© Georgia Public Policy Foundation

Permission to reprint in whole or in part is hereby granted, provided the author and his affiliations are cited.

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