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Opinion: Cut red tape with a regulatory sandbox

During my time in office, I have listened to business owners and community members rightfully complain about government red tape and overregulation. Their shared concern is clear: Innovation evolves rapidly, but government regulations fall behind their times. As a result, the cutting edge of private-sector innovation is often beyond the scope of what government rules were designed to regulate. 

Rep. Alex Riley

When it is unclear how old rules apply to new innovations, entrepreneurs and regulators are too often pitted against one another in a way that harms Missouri. Thankfully, there is a new policy solution to overcome this hurdle called a regulatory sandbox. A regulatory sandbox provides a more flexible regulatory framework for new innovations by allowing innovators and regulators to work cooperatively to safely bring new products and services to consumers. 

Our state should adopt a regulatory sandbox to attract job creators and advance our business-friendly reputation. That’s why I introduced HB 2587, which would allow businesses to test new products or services under the vigilance of regulators who work to protect the safety of Missourians.

While well-designed regulations keep workers and businesses productive and consumers safe, old regulations can become obsolete or be leveraged by established businesses to stifle new competition. Excessive and outdated government red tape prevents individuals from living their dreams and creating opportunities and products which will benefit all of us. When an innovative product or service is created, it might fall under a regulatory regime that was not designed to handle it. 

For example, Uber and Lyft operated in a regulatory grey area when they first launched. They were able to survive and thrive only because they grew rapidly and were beloved by consumers. Policymakers across Missouri accommodated Uber and Lyft in part because they quickly became so big. However, not all innovators grow so rapidly, and many need a flexible regulatory framework in which to prove their business models. 

Imagine a Missouri entrepreneur who creates a financial services company that leverages the emergent blockchain technology. He has the potential to hire Missouri workers and provide a valuable service for local consumers but is unclear whether his business model is legal under state financial regulations (many of which were written decades before technology made the blockchain possible). Under the system established by HB 2587, this entrepreneur could apply for access to the sandbox and have certain regulations waived if his application is accepted, giving the idea an opportunity to grow. Health and safety regulations would still apply, but the entrepreneur could be relieved from anachronistic regulations that simply weren’t designed with new business models in mind.

Last year, Utah became the first state to create a regulatory sandbox that works across industries, and other states have experimented with industry-specific sandboxes. Florida, Hawaii, Nevada, West Virginia, and Wyoming have sandboxes for financial technology; and Kentucky, South Dakota, Vermont, and West Virginia created sandboxes for insurance. While finance and insurance are heavily regulated, a sandbox that’s available across industries will help Missouri grow its manufacturing sector, improve health care outcomes, and potentially even expand access to legal services, to name a few examples.  

Moving quickly and following Utah’s lead will give Missouri an advantage over its neighboring states with a new way to foster job creation. Innovators build their companies where they know they’ll be treated fairly, and a regulatory sandbox is a way to give new business models a fair chance to grow.

A regulatory sandbox cannot solve every challenge for the business community, but it is a valuable tool to foster innovation and give smaller entrepreneurs a fair shot at making it big in the Show-Me State. That’s why, in addition to cutting red tape, I’m pushing Missouri’s government to lead the region and boost its already strong reputation as an innovation-friendly state with a regulatory sandbox.