"Regulatory sandboxes" not fair to all businesses and not good for Kansas

It would be a mistake if state lawmakers in Kansas approved “regulatory sandboxes’’ that allowed selected businesses and industries to sidestep state regulations for a certain time period.

Another way to describe  “regulatory sandboxes’’ is state government giving special sweetheart deals and other special considerations to targeted businesses and industries that they like, while other “non-selected businesses and industries’’ are required to continue to follow all of the rules and laws. 

It would not be fair.

State lawmakers could act on recommendations made in the Nov. 19 Special Committee meeting on Foreign Trade and Regulatory Sandboxes, but let’s hope they don’t. 

The so-called sandbox model is about 10 years old, and originated by the United Kingdom’s Financial Conduct Authority as a “safe place in which businesses can test innovative products, services, business models and delivery mechanisms,’’ according to the report in the Topeka newspaper.

Since then, it has expanded to 17 states in the U.S..

A bill in Kansas was considered in the 2024 legislative session, but it died without making it to the floor for a vote, despite support from the National Federation of Independent Business, the Kansas Chamber of Commerce, Americans For Prosperity and the Kansas Policy Institute.

States have taken different approaches to the sandbox model, with some singling out specific industries and others letting any business or industry apply to opt into the sandbox.

All of the sandbox models have the same thing in common - state government gets to pick their favorites for the sweetheart deals. 

Arizona, the first state to create a regulatory sandbox, targeted financial technology but later broadened it to a general regulatory sandbox.

As part of the sweetheart deals given to selected businesses and industries by state government, the businesses and industries are usually given a limited timeframe to side-step and/or completely ignore specific regulations/laws it identifies as problematic to them in their applications. Most programs do still require all health and safety regulations remain in effect, and the supervising agency varies from state to state.

The story in the Topeka paper did not give any specific examples of what businesses and industries in Kansas might want to take advantage of regulatory sandboxes. That would have been helpful in understanding why there is such a push for them.

Kansas’ 2024 draft bill sought the attorney general to oversee the program, but others have vested the power in the governor or state commerce agencies.

The committee moved to create a sandbox program open to any types of businesses, and allows the overseeing agency to bring in industry experts to advise decision-makers on the regulations impacting businesses.

Although the last proposal sought the Attorney General’s Office to supervise the program, the AG’s Office asked to not be involved since it is primarily charged with regulation enforcement work.

Robert Hutchinson, the deputy attorney general in the civil litigation division of the AG’s Office, said there could be potential conflicts with the AG, since they represent licensing agencies and advise them on regulations. If they oversee a sandbox, they could potentially represent a licensing agency on one end, and a business seeking the OK to avoid regulations on the other.

The biggest so-called benefit of regulatory sandboxes is that it allows selected businesses and industries to test new products or concepts perviously unavailable on consumers, without some of the burdensome regulations they usually have to contend with.

It also reportedly benefits the regulatory body overseeing the business or industry to learn and understand more about them.

Allowing certain businesses and industries to function outside of the regulatory framework that others are bound to creates an unfair business landscape that Kansas should avoid.

I agree with the assessment of Rep. John Carmichael, R-Wichita: If a regulation is seen to be too burdensome or otherwise unneeded, then it needs to be repealed through the administrative and or the legislative process. The regulatory sandbox short-cut is unnecessary.

The sandbox model puts state government officials in the position of creating winners and losers in business and industry.

Too many things can and do go wrong when that much power is given to a few. Let’s keep the lid on regulatory sandboxes and instead elimate the regulations/laws in Kansas affecting all businesses and industries that we don’t need.