OHIO LEGISLATIVE SERVICE COMMISSION
Office of Research Legislative Budget
www.lsc.ohio.gov and Drafting Office
S.B. 249 Bill Analysis
134th General Assembly
Click here for S.B. 249’s Fiscal Note
Version: As Reported by House Financial Institutions
Primary Sponsor: Sen. Wilson
Effective Date:
Carla Napolitano, Attorney
SUMMARY
 Requires the Superintendent of Financial Intuitions to establish a regulatory sandbox
program to enable a person to test novel financial products and services in Ohio on a
temporary basis without obtaining a license or authorization that would otherwise be
required.
 Authorizes novel financial products and services to be tested in the regulatory sandbox
for up to two years, with a possible one-year extension if the sandbox participant is
seeking licensure.
 Requires the Superintendent to consult with all applicable agencies, the agencies that
would regulate the sandbox participant in Ohio if the person were not a sandbox
participant, before admitting the participant into the sandbox.
 Requires the Superintendent and the sandbox participant to enter into an agreement
regarding the scope of the participant’s test, including any restrictions or limits on
testing such as the number of consumers permitted to use the novel financial product or
service and any dollar limits.
 Requires the sandbox participant to provide a consumer certain disclosures prior to
providing a novel financial product or service to the consumer.
 Prohibits a sandbox participant to charge an interest rate on a loan, if it would
otherwise be subject to Ohio consumer lending laws, that is greater than what is
currently permitted under Ohio law.
 This analysis was prepared before the report of the House Financial Institutions Committee appeared
in the House Journal. Note that the legislative history may be incomplete.
November 16, 2022
Office of Research and Drafting LSC Legislative Budget Office
 Requires the sandbox participant to retain records, documents, and data produced in
the ordinary course of business regarding a novel financial product or service tested in
the regulatory sandbox.
 Authorizes the Superintendent to enter into agreements with state, federal, or foreign
regulators that allow sandbox participants to operate in other jurisdictions and allow
entities authorized to operate in other jurisdictions to be recognized as sandbox
participants in Ohio.
 Requires the Superintendent to publish and make publicly available a report every two
years on the performance of sandbox participants and their novel financial products and
services.
TABLE OF CONTENTS
General overview ............................................................................................................................ 2
Application ...................................................................................................................................... 3
Requirement to apply.................................................................................................................. 3
Application contents ................................................................................................................... 3
Review, approval, and denial of application ............................................................................... 5
Applicable agencies ..................................................................................................................... 6
Sandbox operation .......................................................................................................................... 6
General ........................................................................................................................................ 6
Expiration of testing period ......................................................................................................... 6
Extension of testing period ......................................................................................................... 7
Consumer protections .................................................................................................................... 7
Disclosures................................................................................................................................... 7
Ohio Consumer Sales Practices Act (CSPA) ................................................................................. 8
Interest rate................................................................................................................................. 8
Superintendent’s powers ............................................................................................................ 8
Recordkeeping, test failure, security breach .................................................................................. 9
Confidentiality and disclosure of information .............................................................................. 10
Coordination with other jurisdictions ........................................................................................... 11
Biennial report .............................................................................................................................. 11
DETAILED ANALYSIS
General overview
The bill requires the Superintendent of Financial Institutions to establish a regulatory
sandbox program in consultation with applicable agencies (see “Applicable agencies”
below) to enable a person to obtain limited access to the Ohio market to test novel financial
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products or services without obtaining any other license or authorization that otherwise would
be required under the law.1 Applicable agencies are those that would regulate the sandbox
participant in Ohio if the person were not a sandbox participant. The bill applies only to novel
financial products or services.
A “novel financial product or service” is defined in the bill as a financial product or
service that would otherwise be regulated under various specified financial laws in Ohio and
that make use of or incorporates new or emerging technology, or reimagines uses of existing
technologies, to address a problem, provide a benefit, or otherwise offer a product, service,
business model, or delivery mechanism that is not known by the Superintendent to have a
comparable widespread offering in Ohio.2 The bill does not apply to any financial product or
service that require licensure under the Ohio Securities Act, or that includes a business model,
delivery mechanism, or element that requires a license under the Ohio Securities Act. These
products or services are excluded from being tested in the regulatory sandbox under the bill.3 In
general, participants under the regulatory sandbox created under the bill would not be required
to be Ohio residents, but would be subject to Ohio’s jurisdiction, and would have 24 months to
test the novel product or service. The bill requires participants to comply with consumer
protections, such as providing disclosures to the consumer prior to testing the financial product
or service.
Application
Requirement to apply
Under the bill, any person that does not have a license or other authorization or that
does have a license or authorization but the novel product falls outside its scope, may apply to
enter the regulatory sandbox to test a novel financial product. If a person has a license or
authorization, the person may continue that business, but must file an application with the
Superintendent to participate in the regulatory sandbox for the novel financial product. The
bill’s provisions are restricted to the person participating in the regulatory sandbox and the
corresponding novel financial product or service that is being tested in the sandbox. A person
must file a separate application for each novel financial product or service the person seeks to
test.4
Application contents
The Superintendent must develop and make publicly available the application form that
requires the applicant to provide all of the following:
1 R.C. 1355.02.
2 R.C. 1355.01.
3 R.C. 1355.01(C) and (D).
4 R.C. 1355.03(A), 1355.05(D), and (E).
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 Evidence that the applicant is subject to the Superintendent’s jurisdiction, which may be
demonstrated through incorporation, residency, an agreement with the Superintendent
by which the sandbox participant agrees to be subject to Ohio laws and courts relating
to any action arising out of the applicant’s testing a novel financial product or service in
the regulatory sandbox, or otherwise;
 Evidence that the applicant has established a location in the U.S., whether physical or
virtual, that is adequately accessible to the Superintendent from which testing will be
developed and performed and where all required records, documents, and data will be
maintained;
 Payment of an application fee established by the Superintendent.
In addition, the application may require the applicant to provide relevant personal and
contact information, disclosure of any criminal convictions of the applicant and key personnel,
and a description of the novel financial product or service desired to be tested, including
statements regarding all of the following:
 How a novel financial product or service is subject to regulation outside of the
regulatory sandbox;
 How the novel financial product or service would benefit consumers;
 How the novel financial product or service is different from other products or services
available in Ohio;
 What risks will confront consumers that use or purchase the novel financial product or
service;
 How entering the regulatory sandbox would enable a successful test of the novel
financial product or service;
 A description of the proposed testing plan, including estimated time periods for market
entry, market exit, and the pursuit of necessary licensure or authorization;
 How the applicant would wind down the test and protect consumers if the test fails.
As part of its application, an applicant may request that in testing a novel financial
product or service, the applicant be exempt from the operation of any state law other than the
bill’s Regulatory Sandbox Law, including the Consumer Sales Practices Act (CSPA). In requesting
an exemption, an applicant must demonstrate why compliance would burden the applicant or
hinder the test. The Superintendent may grant or deny the request at the Superintendent’s
discretion.5
5 R.C. 1355.03(B).
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Review, approval, and denial of application
Under the bill, the Superintendent will review each completed application on a rolling
basis, and approve or deny the application within 90 days after it is submitted. For any denial,
the Superintendent must inform the applicant of all reasons for the denial. A denial is not an
appealable action for the purposes of the appeal provisions of the Ohio Administrative
Procedure Act.
But, the Superintendent is not required to decide within the 90-day period if the
Superintendent notifies the applicant within the 90-day period that additional information is
required. If additional information is required, the applicant has 30 days to file the additional
information with the Superintendent, and the Superintendent has an additional 90 days from
receipt of the additional information to approve or deny the application.
The Superintendent may only approve an application if all of the following conditions
are met:
 The applicant has provided to the Superintendent all of the information required by the
application form and any additional information requested by the Superintendent.
 The applicant has paid the application fee.
 The Superintendent has consulted with all applicable agencies.
 The application contains sufficient information to demonstrate that the applicant has an
adequate understanding of the novel financial product or service and a sufficient plan to
test, monitor, and assess the novel financial product or service while ensuring
consumers are protected from a test’s failure.
 If the novel financial product or service is a type of loan that would otherwise be subject
to the Ohio Small Loan Act, Ohio Short-Term Loan Act, Ohio General Loan Law, Ohio
Consumer Installment Loan Act, or the Insurance Premium Finance Company Law, the
applicant has proven that the consumer will not be charged interest and fees in
connection with the loan that exceed the maximum otherwise permitted for that type
of loan.
 The applicant has met any other condition imposed by the Superintendent.
Under the bill, the Superintendent is permitted to consider the number of an applicant’s
competitors already in the sandbox as a factor in approving the application for the purpose of
maintaining an appropriate level of competition within the sandbox.6 The bill gives the
Superintendent the sole authority to make the final decision whether to admit a person into
the regulatory sandbox. If the Superintendent approves an application, the applicant is
6 R.C. 1355.03(C); R.C. 119.12, not in the bill.
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considered a sandbox participant and the Superintendent must issue that person a license
number.7
The Superintendent may also require applicants and sandbox participants utilize a
multistate licensing system in complying with the bill. The bill expresses the General Assembly’s
intent that a sandbox participant is deemed to possess an appropriate license under Ohio law
for purposes of any provision of federal law requiring state licensure or authorization such as
the federal prohibition on unlicensed money transmitting.8
Applicable agencies
The Superintendent is required to consult with all applicable agencies before admitting
a person into the regulatory sandbox. An applicable agency is a state department or agency
that is authorized to regulate certain types of business activity in Ohio and that the
Superintendent determines the department or agency would regulate a sandbox participant if
the person were not a sandbox participant. The Superintendent’s consultation with applicable
agencies may include seeking information about whether the applicable agency previously has
either issued a license or other authorization to the applicant or investigated, sanctioned, or
pursued legal action against the applicant. The consultation also may include seeking
information about whether the applicant could obtain a license or other authorization from an
applicable agency after exiting the regulatory sandbox.9
Sandbox operation
General
The Superintendent and the sandbox participant must enter into an agreement
regarding the scope of the participant’s test including any restrictions or limits on testing such
as the number of consumers permitted to use the novel financial product or service and any
dollar limits. The sandbox participant may test the novel financial product or service for a
period of 24 months following the date of approval, unless the participant and Superintendent
agree to a shorter time period. And a sandbox participant may opt out of the sandbox prior to
the expiration of the testing period. If a sandbox participant opts out early, it must comply with
the requirements described in “Expiration of testing period” below.10
Expiration of testing period
The bill requires a sandbox participant to do either of the following at least 30 days
before the end of the testing period:
7 R.C. 1355.03(D) and 1355.05(A).
8 R.C. 1355.05(G) and (H) and 18 United States Code 1960.
9 R.C. 1355.01 and 1355.04(A).
10 R.C. 1355.05(B) and (C).
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