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Utah Blazing a Trail for Welcoming Innovation

This article was published in the Spring 2021 issue

by Connor Boyack, President, Libertas Institute

A decade ago, I founded Libertas Institute, a free-market think tank in Utah. Some might think it odd that a state like ours would need such a voice—after all, aren’t we already widely recognized as being “best for business”? But the reality is that every single year we’ve been around, there has been a clash between innovative entrepreneurs and outdated, restrictive regulations and laws. Turns out, there’s plenty of work to be done.

Whether it’s Uber and Lyft, Zenefits, Tesla, Airbnb and VRBO, food trucks, Homie, Neighbor, Turo, or one of countless others, companies with new business models often find themselves being the square peg in a regulatory round hole. Those with more capital and connections can muscle their way through and find a path forward, but what about the upstart entrepreneurs who lack the ability to effectively purchase the legalization of their activity? What would it look like to have a government that was more flexible for and adaptable to new innovations that might conflict with the way things were previously done? This is the vision behind a new law in Utah—one that the state is pioneering ahead of its peers.

Known as a “regulatory sandbox,” this new legal option allows business owners to seek shelter under a one-year program (with a one-year extension option), which would suspend a law or regulation that stands in their way, while regulators closely monitor the business to ensure everything remains safe. This allows the government to play catch up, giving time for legislators and regulators to revise what’s needed while the company continues to develop and offer their product or service.

This isn’t a new issue for Utah; we’ve worked with legislators in recent years to create these legal systems for the fintech and insurance industries. And the Utah Supreme Court recently joined the effort, creating the Office of Legal Services Innovation to facilitate a sandbox of their own—waiving court rules that stand in the way of innovative approaches to providing legal representation, especially to those who can least afford it. The Court’s sandbox was the first of its kind in the country, and now, in another first, the Utah Legislature has given its unanimous blessing to an all-inclusive sandbox that applies to any business in any industry—a broad approach to welcoming innovation throughout the entire state’s economy. House Bill 217, sponsored by Representative Cory Maloy, created the country’s first broad program of this type. It now serves as a model for other states to follow, some of which are already exploring following in our footsteps.

So, now the ball is in your court. What laws or regulations stand in your way? Does your business model come into conflict with anything on the books? Or have you thought up an idea before that wasn’t allowed, but could go to market within the shelter of a sandbox? So long as the law or regulation you’re looking to avoid doesn’t directly deal with health, safety, or consumer protection, then you have the opportunity to hit the pause button and show policymakers why that restriction should be revised or repealed.

This is an exciting endeavor that Utah is leading out on, serving as yet another example of our state’s forward-thinking approach to entrepreneurship and economic development. Starting in July, the Governor’s Office of Economic Development (GOED)—which will oversee and administer the sandbox program—plans to begin taking applications.

But even if your business isn’t in need of this regulatory flexibility, it’s heartening for us all to know that elected officials are actively seeking ideas that get the government out of the way of entrepreneurs. Especially in a post-Covid-19 world, we need flexibility for businesses and a light touch from the government to ensure that the market’s problem-solvers can get to work.

To that end, the new law also requires GOED to set up a website where businesses can flag laws or regulations that are problems for them. These reports will prompt legislative hearings on the issue, requiring regulators to justify the restriction and giving a venue for business owners to make their case for why the status quo should change. Expect to have a greater opportunity in the near future to help make sure the state is receptive to the issues facing the business community.

Our free-market think tank would love to avoid many future clashes between regulators and innovators. Businesses need a viable path to the market, and outdated regulations need to be discarded rather than defended.  An all-inclusive regulatory sandbox seems like an excellent mechanism to make sure the state invites and embraces this inevitable change.


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Utah Blazing a Trail for Welcoming Innovation
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