2023 -- H 5844
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LC001951
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S TATE OF RHODE IS L A N D
IN GENERAL ASSEMBLY
JANUARY SESSION, A.D. 2023
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A N A CT
RELATING TO STATE AFFAIRS AND GOVERNMENT -- UNIVERSAL REGULATORY
SANDBOX ACT
Introduced By: Representatives Place, Rea, and Nardone
Date Introduced: March 01, 2023
Referred To: House Corporations
It is enacted by the General Assembly as follows:
1 SECTION 1. Title 42 of the General Laws entitled "STATE AFFAIRS AND
2 GOVERNMENT" is hereby amended by adding thereto the following chapter:
3 CHAPTER 64.35
4 UNIVERSAL REGULATORY SANDBOX ACT
5 42-64.35-1. Purpose.
6 This chapter establishes a universal regulatory sandbox, which allows businesses, under
7 the observation of regulators, to trial innovative products, services, and business models while
8 temporarily receiving a waiver of inapplicable laws and/or regulations.
9 42-64.35-2. Definitions.
10 (1) “Advisory committee” means the general regulatory sandbox program created in § 42-
11 64.35- 4.
12 (2) “Applicable agency” means a department or agency of the state that by law regulates a
13 business activity and persons engaged in such business activity, including the issuance of licenses
14 or other types of authorization, which the regulatory relief office determines would otherwise
15 regulate a sandbox participant.
16 (3) “Applicant” means a person that applies to participate in the regulatory sandbox.
17 (4) “Blockchain technology” means the use of a digital database containing records of
18 financial transactions, which can be simultaneously used and shared within a decentralized,
1 publicly accessible network and can record transactions between two (2) parties in a verifiable and
2 permanent way.
3 (5) “Consumer” means a person that purchases or otherwise enters into a transaction or
4 agreement to receive an offering pursuant to a demonstration by a sandbox participant.
5 (6) “Demonstrate” or “demonstration” means to temporarily provide an offering in
6 accordance with the provisions of the regulatory sandbox program described in this chapter.
7 (7) “Executive director” means the secretary of commerce of the commerce corporation.
8 (8) “Financial product or service” means:
9 (i) A financial product or financial service that requires state licensure or registration; or
10 (ii) A financial product, financial service, or banking business that includes a business
11 model, delivery mechanism, offering of deposit accounts, or element that may require other
12 authorization to act as a financial institution, enterprise, or other entity that is regulated by the
13 department of business regulation.
14 (9) “Innovation” means the use or incorporation of a new or existing idea, a new or
15 emerging technology, or a new use of existing technology, including blockchain technology, to
16 address a problem, provide a benefit, or otherwise offer a product, production method, or service.
17 (10) “Insurance product or service” means an insurance product or insurance service that
18 requires state licensure, registration, or other authorization as regulated by title 27, including an
19 insurance product or insurance service that includes a business model, delivery mechanism, or
20 element that requires a license, registration, or other authorization to do an insurance business, act
21 as an insurance producer or consultant, or engage in insurance adjusting as regulated by department
22 of business regulation, insurance division.
23 (11) “Offering” means a product, production method, or service, including a financial
24 product or service or an insurance product or service, that includes an innovation.
25 (12) “Product” means a commercially distributed good that is:
26 (i) Tangible personal property;
27 (ii) The result of a production process; and
28 (iii) Passed through the distribution channel before consumption.
29 (13) “Production” means the method or process of creating or obtaining a good, which may
30 include assembling, breeding, capturing, collecting, extracting, fabricating, farming, fishing,
31 gathering, growing, harvesting, hunting, manufacturing, mining, processing, raising, or trapping a
32 good.
33 (14) “Regulatory relief office” means the office of regulatory reform (ORR) created within
34 the commerce corporation.
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1 (15) “Regulatory sandbox” means the general regulatory sandbox program created in this
2 chapter which allows a person to temporarily demonstrate an offering under a waiver or suspension
3 of one or more state laws or regulations.
4 (16) “Sandbox participant” means a person whose application to participate in the
5 regulatory sandbox is approved in accordance with the provisions of this chapter.
6 (17) “Service” means any commercial activity, duty, or labor performed for another person.
7 42-64.35-3. Regulatory relief office - Appointment of director - Responsibilities.
8 (a) There is created within the commerce corporation the regulatory relief office.
9 (b) The regulatory relief office shall be administered by a director appointed by the
10 executive director.
11 (c) The director shall report to the executive director and may appoint staff subject to the
12 approval of the executive director.
13 (d) The regulatory relief office shall:
14 (1) Administer the provisions of this chapter;
15 (2) Administer the regulatory sandbox program; and
16 (3) Act as a liaison between private businesses and applicable agencies to identify state
17 laws or regulations that could potentially be waived or suspended under the regulatory sandbox
18 program.
19 (e) The regulatory relief office shall:
20 (1) Review state laws and regulations that may unnecessarily inhibit the creation and
21 success of new companies or industries and provide recommendations to the governor and the
22 general assembly on modifying such state laws and regulations;
23 (2) Create a framework for analyzing the risk level to the health, safety, and financial well-
24 being of consumers related to permanently removing or temporarily waiving laws and regulations
25 inhibiting the creation or success of new and existing companies or industries;
26 (3) Propose potential reciprocity agreements between states that use or are proposing to
27 use similar regulatory sandbox programs as described in this chapter;
28 (f) In accordance with chapter 35 of title 42 ("administrative procedures"), and the
29 provisions of this chapter, make rules regarding:
30 (1) Administering the regulatory sandbox, including promulgating rules and regulations
31 regarding the application process and the reporting requirements of sandbox participants; and
32 (2) Cooperating and consulting with other agencies in the state that administer sandbox
33 programs.
34 42-64.35-4. Advisory committee.
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1 (a) There is created the general regulatory sandbox program advisory committee.
2 (b) The advisory committee shall have eleven (11) members as follows:
3 (1) Six (6) members appointed by the office director who represent businesses interests and
4 are selected from a variety of industry clusters; three (3) members appointed by the office director
5 who represent state agencies that regulate businesses; one member of the senate, appointed by the
6 president of the senate; and one member of the house of representatives, appointed by the speaker
7 of the house of representatives.
8 (2) Subject to subsection (c) of this section, members of the advisory committee who are
9 not legislators shall be appointed to a four (4) year term.
10 (c) Notwithstanding the requirements of subsection (b) of this section, the office director
11 may adjust the length of terms of appointments and reappointments to the advisory committee in
12 order that approximately fifty percent (50%) of the advisory committee is appointed every two (2)
13 years.
14 (d) The office director shall select a chair of the advisory committee on an annual basis.
15 (e) A majority of the advisory committee constitutes a quorum for the purpose of
16 conducting advisory committee business, and the action of the majority of a quorum constitutes the
17 action of the advisory committee.
18 (f) The advisory committee shall advise and make recommendations to the regulatory relief
19 office as described in this chapter.
20 (g) The regulatory relief office shall provide administrative staff support for the advisory
21 committee.
22 (h) A member shall not receive compensation or benefits for the member’s service;
23 provided, however, a member appointed under subsection (b)(1) of this section representing
24 businesses interest may receive per diem and travel expenses.
25 42-64.35-5. General regulatory sandbox program and application requirements.
26 (a) There is created in the regulatory relief office, the general regulatory sandbox program.
27 In administering the regulatory sandbox, the regulatory relief office:
28 (1) Shall consult with each applicable agency;
29 (2) Shall establish a program to enable a person to obtain legal protections and limited
30 access to the market in the state to demonstrate an offering without obtaining a license or other
31 authorization that might otherwise be required;
32 (3) May enter into agreements with or adopt the best practices of corresponding federal
33 regulatory agencies or other states that are administering similar programs; and
34 (4) May consult with businesses in the state about existing or potential proposals for the
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1 regulatory sandbox.
2 (b) An applicant for the regulatory sandbox may contact the regulatory relief office to
3 request a consultation regarding the regulatory sandbox before submitting an application. The
4 regulatory relief office shall provide assistance to an applicant in preparing an application for
5 submission.
6 (c) An applicant for the regulatory sandbox shall provide to the regulatory relief office an
7 application in a form prescribed by the regulatory relief office that:
8 (1) Confirms the applicant is subject to the jurisdiction of the state;
9 (2) Confirms the applicant has established a physical or virtual location in the state, from
10 which the demonstration of an offering will be developed and performed and where all required
11 records, documents, and data will be maintained;
12 (3) Contains relevant personal and contact information for the applicant, including legal
13 names, addresses, telephone numbers, email addresses, website addresses, and other information
14 required by the regulatory relief office;
15 (4) Discloses criminal convictions of the applicant or other participating personnel, if any;
16 (5) Contains a description of the offering to be demonstrated, including statements
17 regarding:
18 (i) How the offering is subject to licensing, legal prohibition, or other authorization
19 requirements outside of the regulatory sandbox;
20 (ii) Each law or regulation that the applicant seeks to have waived or suspended while
21 participating in the regulatory sandbox program;
22 (iii) How the offering would benefit consumers;
23 (iv) How the offering is different from other offerings available in the state;
24 (v) What risks might exist for consumers who use or purchase the offering;
25 (vi) How participating in the regulatory sandbox would enable a successful demonstration
26 of the offering;
27 (vii) A description of the proposed demonstration plan, including estimated time periods
28 for beginning and ending the demonstration;
29 (viii) Recognition that the applicant will be subject to all laws and regulations pertaining
30 to the applicant’s offering after conclusion of the demonstration;
31 (ix) How the applicant will end the demonstration and protect consumers if the
32 demonstration fails;
33 (x) Lists each government agency, if any, that the applicant knows regulates the applicant’s
34 business; and
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1 (xi) Provides any other required information as determined by the regulatory relief office.
2 (d) The regulatory relief office may collect an application fee from an applicant.
3 (e) An applicant shall file a separate application for each offering that the applicant wishes
4 to demonstrate.
5 (f) After an application is filed, the regulatory relief office shall:
6 (1) Classify, as protected record, any part of the application that the office determines is
7 nonpublic, confidential information that if disclosed would result in actual economic harm to the
8 applicant in accordance with chapter 2 of title 38 ("access to public records");
9 (2) Consult with each applicable government agency that regulates the applicant’s business
10 regarding whether more information is needed from the applicant; and
11 (3) Seek additional information from the applicant that the regulatory relief office
12 determines is necessary.
13 (g) No later than five (5) business days after the day on which a complete application is
14 received by the regulatory relief office, the regulatory relief office shall:
15 (1) Review the application and refer the application to each applicable government agency
16 that regulates the applicant’s business;
17 (2) Provide to the applicant:
18 (i) An acknowledgment of receipt of the application; and
19 (ii) The identity and contact information of each regulatory agency to which the application
20 has been referred for review;
21 (3) Provide public notice, on the office’s website and through other appropriate means, of
22 each law or regulation that the office is considering to suspend or waive under the application.
23 (h) Subject to subsections (h)(3) and (h)(7) of this section, no later than thirty (30) days
24 after the day on which an applicable agency receives a complete application for review, the
25 applicable agency shall provide a written report to the office director of the applicable agency’s
26 findings.
27 (1) The report shall:
28 (i) Describe any identifiable, likely, and significant harm to the health, safety, or financial
29 well-being of consumers that the relevant law or regulation protects against; and
30 (ii) Make a recommendation to the regulatory relief office that the applicant either be
31 admitted or denied entrance into the regulatory sandbox.
32 (2) The applicable agency may request an additional five (5) business days to deliver the
33 written report by providing notice to the office director, which request shall automatically be
34 granted.
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1 (3) The applicable agency shall only request one extension per application.
2 (4) If the applicable agency recommends an applicant under this section be denied entrance
3 into the regulatory sandbox, the written report shall include a description of the reasons for the
4 recommendation, including why a temporary waiver or suspension of the relevant laws or
5 regulations would potentially significantly harm the health, safety, or financial well-being of
6 consumers or the public and the likelihood of such harm occurring.
7 (5) If the agency determines that the consumer’s or public’s health, safety, or financial
8 well-being can be protected through less restrictive means than the existing relevant laws or
9 regulations, then the applicable agency shall provide a recommendation of how that can be
10 achieved.
11 (6) If an applicable agency fails to deliver a written report as described in subsection (h)(1)
12 of this section, the office director shall assume that the applicable agency does not object to the
13 temporary waiver or suspension of the relevant laws or regulations for an applicant seeking to
14 participate in the regulatory sandbox.
15 (7) Notwithstanding any other provision of this section, an applicable agency shall by
16 written notice to the regulatory relief office:
17 (i) Within the thirty (30) days after the day on which the applicable agency receives a
18 complete application for review, or within thirty-five (35) days if an extension has been requested
19 by the applicable agency, reject an application if the applicable agency determines, in the applicable
20 agency’s sole discretion, that the applicant’s offering fails to comply with standards or
21 specifications:
22 (A) Required by federal law or regulation; or
23 (B) Previously approved for use by a federal agency; or
24 (ii) Reject an application preliminarily approved by the regulatory relief office, if the
25 applicable agency:
26 (A) Recommended rejection of the application in accordance with subsection (h)(4) of this
27 section in the agency’s written report; and
28 (B) Provided in the written notice under subse