PRINTER'S NO. 629
THE GENERAL ASSEMBLY OF PENNSYLVANIA
SENATE BILL
No.
633
Session of
2023
INTRODUCED BY COLEMAN, PHILLIPS-HILL AND STEFANO, APRIL 24, 2023
REFERRED TO INTERGOVERNMENTAL OPERATIONS, APRIL 24, 2023
AN ACT
Establishing the Regulatory Sandbox Program, the Regulatory
Relief Office and an advisory committee; and providing for
their powers and duties.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Short title.
This act shall be known and may be cited as the Regulatory
Sandbox Program Act.
Section 2. Definitions.
The following words and phrases when used in this act shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Advisory committee." The Regulatory Sandbox Program
Advisory Committee established under section 4.
"Applicable agency." A department or agency of the
Commonwealth that by law regulates a business activity, and
persons engaged in a business activity, including the issuance
of licenses or other types of authorization, that the office
determines would otherwise regulate a sandbox participant. The
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term includes the Pennsylvania Public Utility Commission and the
Pennsylvania Gaming Control Board.
"Applicant." A person that applies to participate in the
regulatory sandbox.
"Blockchain technology." An electronic method for storing
cryptographically secure data in a database or distributed
ledger technology that is decentralized, consensus-based,
mathematically verified and distributed across multiple
locations.
"Consumer." A person that purchases or otherwise enters into
a transaction or agreement to receive an offering under a
demonstration by a sandbox participant.
"Demonstrate" or "demonstration." To temporarily provide an
offering in accordance with the provisions of the program.
"Director." The director of the office.
"Executive Board." The Executive Board of the Commonwealth.
"Financial product or service." Either of the following:
(1) a financial product or financial service that
requires State licensure or registration; or
(2) a financial product, financial service or banking
business that includes a business model, delivery mechanism,
offering of deposit accounts or element that may require
other authorization to act as a financial institution,
enterprise or other entity that is regulated by State law.
"Innovation." The use or incorporation of a new or existing
idea, a new or emerging technology or a new use of existing
technology, including, but not limited to, blockchain
technology, to address a problem, provide a benefit or otherwise
offer a product, production method or service.
"Insurance product or service." A product or service that is
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offered by an insurer that requires State licensure,
registration or other authorization as regulated by State law,
including a product or insurance service that includes a
business model, delivery mechanism or element that requires a
license, registration or other authorization to do an insurance
business, act as an insurance producer or consultant or engage
in insurance adjusting as regulated by State law.
"Offering." A product, production method or service,
including a financial product or service or an insurance product
or service, that includes an innovation.
"Office." The Regulatory Relief Office established under
section 3.
"Product." A commercially distributed good that is:
(1) the result of a production process; and
(2) passed through the distribution channel before
consumption.
"Production." The method or process of creating or obtaining
a good, which may include assembling, breeding, capturing,
collecting, extracting, fabricating, farming, fishing,
gathering, growing, harvesting, hunting, manufacturing, mining,
processing, raising or trapping a good.
"Program." The Regulatory Sandbox Program established under
section 5.
"Regulatory sandbox." A State law that allows a person to
temporarily demonstrate an offering under a waiver or suspension
of a State law, regulation, rule or guidance that would
otherwise apply to the offering.
"Sandbox participant." A person whose application to
participate in the regulatory sandbox is approved in accordance
with the provisions of this act.
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"Service." A commercial activity, duty or labor performed
for a consumer.
Section 3. Regulatory Relief Office.
(a) Establishment.--The Regulatory Relief Office is
established in the Governor's Office.
(b) Director and staff.--The office shall be administered by
a director who shall be appointed by and report to the Governor
and may appoint staff subject to the approval of the Governor.
(c) Duties.--The office shall:
(1) Administer this act.
(2) Administer the program.
(3) Act as a liaison between private businesses and
applicable agencies to identify State laws, regulations,
rules and guidances that could potentially be waived or
suspended under the program.
(d) Discretionary powers.--The office may:
(1) Review State laws and regulations that may inhibit
the creation and success of companies or industries and
provide recommendations to the Governor and the General
Assembly.
(2) Enter into reciprocity agreements with Federal,
state or foreign regulators to advance the purpose of the
regulatory sandbox, which may include permission for any
sandbox participant to operate in other jurisdictions.
(3) Promulgate regulations relating to:
(i) administering the regulatory sandbox, including
making the application process and the reporting
requirements of sandbox participants; and
(ii) cooperating and consulting with other agencies
in the Commonwealth that administer sandbox programs.
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Section 4. Advisory committee.
(a) Establishment.--The Regulatory Sandbox Program Advisory
Committee is established.
(b) Membership.--The advisory committee shall have the
following members, who need not be residents of this
Commonwealth:
(1) Two members appointed by the director who represent
business interests and are selected from a variety of
industry clusters.
(2) Three members appointed by the Speaker of the House
of Representatives, two of whom represent business interests
and are selected from a variety of industry clusters and one
of whom is a member of the House of Representatives.
(3) Three members appointed by the President pro tempore
of the Senate, two of whom represent business interests and
are selected from a variety of industry clusters and one of
whom is a member of the Senate.
(c) Terms.--
(1) Subject to paragraph (2), members of the advisory
committee who are appointed under subsection (b)(1) shall
have a four-year term.
(2) Notwithstanding paragraph (1), the director may
adjust the length of terms of appointments and reappointments
to the advisory committee so that approximately half of the
advisory committee is appointed every two years.
(d) Chair.--The director shall select a chair of the
advisory committee on an annual basis.
(e) Quorum.--A majority of the advisory committee
constitutes a quorum for the purpose of conducting advisory
committee business. The action of the majority of a quorum shall
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constitute the action of the advisory committee.
(f) Advice and recommendations.--The advisory committee
shall advise and make recommendations to the office as described
in this act.
(g) Staff.--The office shall provide administrative staff
support for the advisory committee.
(h) Compensation.--A member may not receive compensation or
benefits for the member's service, but members appointed under
subsection (b)(1) may receive per diem and travel expenses in
accordance with the rules of the Executive Board.
(i) Override of applicable agency disapproval.--The advisory
committee may, by a two-thirds vote, override the decision of an
applicable agency to reject an application under section 5(h)
(7).
Section 5. Regulatory Sandbox Program.
(a) Establishment.--The Regulatory Sandbox Program is
established in the office.
(b) Administration of program.--The office shall administer
the program by:
(1) Consulting with each applicable agency.
(2) Assisting persons with the application and approval
process for participation in the regulatory sandbox.
(3) Entering into agreements with or adopting the best
practices of corresponding Federal regulatory agencies or
other states that are administering similar programs.
(4) Consulting with businesses in this Commonwealth
about existing or potential proposals for the regulatory
sandbox.
(c) Consultation.--
(1) An applicant for a regulatory sandbox may contact
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the office to request a consultation regarding the regulatory
sandbox before submitting an application.
(2) The office may provide assistance to the applicant
in preparing an application for submission.
(d) Application.--An applicant for the regulatory sandbox
shall provide to the office an application, on a form prescribed
by the office, that:
(1) Confirms the applicant has established a presence in
this Commonwealth, from which the demonstration of an
offering will be developed and performed, and where all
required records, documents and data will be maintained.
(2) Contains relevant personal and contact information
for the applicant, including legal names, addresses,
telephone numbers, email addresses, website addresses and
other information required by the office.
(3) Discloses any criminal convictions of the applicant
or other participating personnel that occurred within the
previous five years.
(4) Contains a description of the offering to be
demonstrated, including statements regarding:
(i) how the offering is subject to licensing, legal
prohibition or other authorization requirements outside
of the regulatory sandbox;
(ii) each law or regulation that the applicant seeks
to have waived or suspended while participating in the
program;
(iii) how the offering would benefit consumers;
(iv) how the offering is different from other
offerings available in this Commonwealth;
(v) what risks might exist for consumers who use or
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purchase the offering;
(vi) how participating in the regulatory sandbox
would enable a successful demonstration of the offering;
(vii) a description of the proposed demonstration
plan, including estimated time periods for beginning and
ending the demonstration;
(viii) recognition that the applicant will be
subject to all laws and regulations pertaining to the
applicant's offering after conclusion of the
demonstration; and
(ix) how the applicant will end the demonstration
and protect consumers if the demonstration fails.
(5) Lists any government agency that the applicant knows
regulates the applicant's business.
(6) Provides other required information as determined by
the office.
(e) Fees.--The office may collect an application fee of $50.
An applicant that is admitted into the regulatory sandbox
program must pay a participation fee of $450 to participate in
the 24-month sandbox period to cover reasonable agency expenses.
Additional participation fees may apply depending on factors
such as the size of an entity or the number of customers an
entity may have, but shall be capped at a reasonable amount to
encourage participation in the sandbox program. The Regulatory
Relief Office shall determine and publish a fee schedule for the
additional participation fees.
(f) Separate applications.--An applicant must file a
separate application for each offering that the applicant wishes
to demonstrate.
(g) Duties of office.--After an application is filed with
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the office, the office shall:
(1) Determine whether any part of the application
satisfies the exceptions under section 708(b)(1)(ii) of the
act of February 14, 2008 (P.L.6, No.3), known as the Right-
to-Know Law.
(2) Consult with each applicable agency that regulates
the applicant's proposed offering regarding whether more
information is needed from the applicant.
(3) Seek additional information from the applicant that
the office determines is necessary.
(4) No later than five business days after the
application is received by the office:
(i) Review the application and refer the application
to each applicable agency that regulates the applicant's
proposed offering.
(ii) Provide the applicant:
(A) An acknowledgment of receipt of the
application.
(B) The identity and contact information of each
regulatory agency to which the applicant has been
referred for review.
(C) Public notice, on the office's publicly
accessible Internet website and through other
appropriate means, of each law or regulation that the
applicant seeks to suspend or waive under the
application.
(h) Duties of applicable agencies.--
(1) Subject to paragraphs (3) and (7), no later than 30
days after the day on which an applicable agency receives a
complete application for review, the applicable agency shall
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provide a written report to the director of the applicable
agency's findings.
(2) The report shall:
(i) Describe any identifiable, likely and
significant harm to the health, safety or financial well-
being of consumers that the relevant law or regulation
protects against.
(ii) Make a recommendation to the office that the
applicant either be admitted or denied entrance into the
regulatory sandbox.
(3) The applicable agency may request an additional five
business days to deliver the written report by providing
notice to the director, which request shall automatically be
granted. The applicable agency may only request one extension
per application.
(4) If the applicable agency recommends an applicant
under this subsection be denied entrance into the regulatory
sandbox, the written report shall include a description of
the reasons for the recommendation, including why a temporary
waiver or suspension of the relevant law or regulations would
potentially significantly harm the health, safety or
financial well-being of consumers or the public and the
likelihood of the harm occurring.
(5) If the agency determines that the consumer's or
public's health, safety or financial well-being can be
protected through less restrictive means than the existing
relevant law or regulations, the applicable agency shall
provide a recommendation of how that can be achieved.
(6) If an applicable agency fails to deliver a written
report as described in this subsection, the director shall
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assume that the applicable agency does not object to the
temporary waiver or suspension of the relevant law or
regulations for an applicant seeking to participate in the
regulatory sandbox, and the application shall be deemed
approved.
(7) Notwithstanding any other provision of this section,
an applicable agency may, by written notice to the office
within the 30 days after the applicable agency receives a
complete application for review or within 35 days, if an
extension has been requested by the applicable agency,
recommend that the office reject an application if the
applicable agency determines, in the applicable agency's sole
discretion, that the applicant's offering fails to comply
with standards or specifications:
(i) required by Federal law or regulation; or
(ii) previously approved for use by a Federal
agency.
(8) If an applicable agency recommends that the office
reject an application under paragraph (7), the office may not
approve the application. The rejection may be overridden by
the advisory committee as provided in section 4(i).
(9) An applicable agency shall cooperate with the office
to identify regulations that need to be waived.
(i) Review by advisory committee.--
(1) Upon receiving a written report described in
subsection (h), the director shall provide the application
and the written report to the advisory committee.
(2) The director may call the advisory committee to meet
as needed, but not less than once per quarter if applications
are available for review.
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(3) After receiving and reviewing the application and
written report, the advisory committee shall provide to the
director the advisory committee's recommendation as to
whether or not the applicant should be admitted as a sandbox
participant under this act.
(4) As part of the advisory committee's review of each
written report, the advisory committee shall use the criteria
required for an applicable agency as described in subsection
(h).
(j) Office consultations.--
(1) In reviewing an application and each applicable
agency's report and recommendation, the office shall consult
with each applicable agency and the advisory committee before
admitting an applicant into the regulatory sandbox.
(2) The consultation with each applicable agency and the
consultation with the advisory committee may include seeking
information about whether:
(i) The applicable agency has previously issued a
license or other authorization to the applicant.
(ii) The applicable agency has previously
investigated, sanctioned or pursued legal action against
the applicant.
(k) Factors to be considered.--
(1) In reviewing an application under this section, the
office and applicable agency shall consider whether a
competitor to the applicant is or has been a sandbox
participant and, if so, weigh that as a factor in favor of
allowing the applicant to also become a sandbox participant.
(2) In reviewing an application under this section, the
office shall consider, in addition to the factor in paragraph
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(1), whether:
(i) The applicant's plan will adequately protect
consumers from potential harm identified by an applicable
agency in the applicable agency's written report.
(ii) The risk of harm to consumers is outweighed by
the potential benefits to consumers from the applicant's
participation in the regulatory sandbox.
(iii) A waiver or suspension of State law or
regulations that regulate an offering should not be
waived or suspended even if the applicant is approved as
a sandbox participant, including applicable antifraud or
disclosure provisions.
(l) Sandbox participation.--
(1) An applicant becomes a sandbox participant if the
office approves the application for the regulatory sandbox
and enters into a written agreement with the applicant
describing the specific law and regulations that are waived
or suspended as part of participation in the regulatory
sandbox.
(2) Notwithstanding any other provision of this act, the
office may not enter into a written agreement with an
applicant that waives or suspends a tax, fee or charge that
is administered by the Department of Revenue.
(m) Denial of application.--
(1) The denial of an application submitted under this
section is subject to review by the advisory committee. The
advisory committee shall complete the review within 30 days
and may override the denial by a two-thirds vote. There shall
be no judicial review of the advisory committee decision.
(2) The office shall deny an application for
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participation in the regulatory sandbox described in this
section if the applicant or another person who seeks to
participate with the applicant in demonstrating an offering
has been convicted, entered a plea of nolo contendere or
entered a plea of guilty or nolo contendere held in abeyance,
for a crime involving significant theft, fraud or dishonesty
that bears a significant relationship to the applicant's or
other participant's ability to safely and competently
participate in the regulatory sandbox program.
(n) Public notice.--
(1) When an applicant is approved for participation in
the regulatory sandbox, the office shall provide public
notice of the approval on the office's publicly accessible
Internet website and through other appropriate means.
(2) The public notice shall state:
(i) The name of the sandbox participant.
(ii) The industries the sandbox participant
represents.
(iii) Each law or regulation that is suspended or
waived for the sandbox participant as allowed by the
regulatory sandbox.
(3) In addition to the information described in
paragraph (2), the following information shall be made
available on the office's publicly accessible Internet
website and through other appropriate means:
(i) Documentation regarding the office's
determination and grounds for approving each sandbox
participant.
(ii) Public notice regarding any sandbox
participant's revocation to participate in the regulatory
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sandbox.
(o) Effect of criminal convictions.--A criminal conviction
may be weighed in the application process, but shall not be a
barrier to participation in the regulatory sandbox, except as
specified in subsection (m)(4).
Section 6. Effect of application approval.
(a) General rule.--If the office approves an application
under this act, the sandbox participant has 24 months after the
day on which the application was approved to demonstrate the
offering described in the sandbox participant's application.
(b) Conditions.--An offering that is demonstrated within the
regulatory sandbox is subject to the following conditions:
(1) Each consumer must be a resident of this
Commonwealth, except as permitted under reciprocal agreements
established under section 3(d)(2).
(2) No law or regulation may be waived or suspended if
the waiver or suspension would prevent a consumer from
seeking restitution in the event that the consumer is harmed
by the waiver or suspension.
(c) Construction.--
(1) Nothing in this section shall be construed to
restrict a sandbox participant who holds a license or other
authorization in another jurisdiction from acting in
accordance with that license or other authorization.
(2) A sandbox participant is deemed to possess an
appropriate license or other authorization under State law
for the purpose of any provision of Federal law requiring
licensure or other authorization by the Commonwealth.
(d) Applicability of enforcement law.--
(1) During the demonstration period, a sandbox
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participant is not subject to the enforcement of State law or
regulations identified in the written agreement between the
office and the sandbox participant.
(2) A prosecutor may not file or pursue charges against
a sandbox participant for failure to comply with a law or
regulation identified in the written agreement between the
office and the sandbox participant that occurs during the
demonstration period.
(3) A State agency may not file or pursue any punitive
action against a sandbox participant, including a fine or
license suspension or revocation, for the violation of a law
or regulation that:
(i) is identified as being waived or suspended in
the written agreement between the office and the sandbox
participant; and
(ii) occurs during the demonstration period.
(e) Criminal liability.--Notwithstanding subsection (d):
(1) A sandbox participant does not have immunity related
to a violation under 18 Pa.C.S. (relating to crimes and
offenses) committed during the sandbox participant's
participation in the regulatory sandbox.
(2) A sandbox participant that provides an offering
shall comply with all applicable Federal law and regulations
governing consumer protection.
(f) Termination.--By written notice, the office may
terminate a sandbox participant's participation in the
regulatory sandbox at any time and for any reason that the
sandbox participant is not operating in good faith to bring an
offering to market.
(g) No liability for office.--The office and the office's
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employees are not liable for any business loss or the recouping
of an application expense or other expense related to the
regulatory sandbox, including for:
(1) denying an applicant's application to participate in
the regulatory sandbox for any reason; or
(2) ending a sandbox participant's participation in the
regulatory sandbox at any time and for any reason.
Section 7. Annual report.
The director shall prepare and submit an annual report to the
General Assembly relating to the office. The report shall
include:
(1) information regarding each participant in the
regulatory sandbox, including which industries each
participant represents and the anticipated or actual cost
savings that each participant experienced;
(2) recommendations regarding any law or regulation that
should be permanently modified;
(3) information regarding outcomes for consumers; and
(4) recommendations for changes to the regulatory
sandbox program or other duties of the office.
Section 8. Consumer protection.
(a) Duty of sandbox participants.--Before demonstrating an
offering to a consumer, a sandbox participant shall disclose the
following to the consumer:
(1) The name and contact information of the sandbox
participant.
(2) That the offering is authorized under the regulatory
sandbox and, if applicable, that the sandbox participant does
not have a license or other authorization to provide an
offering under State law that regulates offerings outside of
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the regulatory sandbox.
(3) That the offering is undergoing testing and may not
function as intended and may expose the consumer to certain
risks as identified by the applicable agency's written
report.
(4) That the provider of the offering is not immune from
civil liability for any loss or damages caused by the
offering.
(5) That the provider of the offering is not immune from
criminal prosecution for violations of State law or
regulations that are not suspended or waived as allowed by
the regulatory sandbox.
(6) That the offering is a temporary demonstration that
may be discontinued at the end of the demonstration period.
(7) The expected end date of the demonstration period.
(8) That the consumer may contact the office and file a
complaint regarding the offering being demonstrated.
(9) The office's telephone number and publicly
accessible Internet website address where a complaint may be
filed.
(b) Form of disclosure.--The disclosure required by
subsection (a) shall be provided to a consumer in a clear and
conspicuous form and, for an Internet or application-based
offering, a consumer must acknowledge receipt of the disclosure
before any transaction may be completed.
(c) Additional disclosures.--The office may require that a
sandbox participant make disclosures to a consumer in addition
to the disclosure described in subsection (a).
Section 9. Requirements for exiting regulatory sandbox.
(a) General rule.--At least 30 days before the end of the
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24-month regulatory sandbox demonstration period, a sandbox
participant shall:
(1) notify the office that the sandbox participant will
exit the regulatory sandbox and discontinue the sandbox
participant's demonstration after the day on which the 24-
month demonstration period ends; or
(2) seek an extension in accordance with law.
(b) End of demonstration period.--Subject to subsection (c),
if the office does not receive notification as required by
subsection (a), the regulatory sandbox demonstration period ends
at the end of the 24-month testing period.
(c) Ongoing duties.--If a demonstration includes an offering
that requires ongoing duties, the sandbox participant may
continue to do so, but will be subject to enforcement of the law
or regulations that were waived or suspended as part of the
regulatory sandbox.
Section 10. Extensions.
(a) Request for extension.--Not later than 30 days before
the end of the 24-month regulatory sandbox demonstration period,
a sandbox participant may request an extension of the regulatory
sandbox demonstration period.
(b) Time period.--
(1) The office shall grant or deny a request for an
extension by the end of the 24-month regulatory sandbox
testing period.
(2) The office may grant an extension in accordance with
this section for not more than 12 months after the end of the
regulatory sandbox demonstration period.
Section 11. Recordkeeping and reporting requirements.
(a) General rule.--A sandbox participant shall retain
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records, documents and data produced in the ordinary course of
business regarding an offering demonstrated in the regulatory
sandbox.
(b) Notice to office and applicable agencies.--If a sandbox
participant ceases to provide an offering before the end of a
demonstration period, the sandbox participant shall notify the
office and each applicable agency and report on actions taken by
the sandbox participant to ensure that consumers have not been
harmed as a result.
(c) Quarterly reports.--The office shall establish quarterly
reporting requirements for a sandbox participant, including
information about any consumer complaints.
(d) Inspection of records.--The office may request records,
documents and data from a sandbox participant and, at the
office's request, the sandbox participant shall make the
records, documents and data available for inspection by the
office.
(e) Notice of incidents.--
(1) The sandbox participant shall notify the office and
each applicable agency of an incident that results in harm to
the health, safety or financial well-being of a consumer.
(2) If the sandbox participant fails to notify the
office and each applicable agency of an incident, or the
office or an applicable agency has evidence that significant
harm to a consumer has occurred, the office may immediately
remove the sandbox participant from the regulatory sandbox.
(f) Post-participation report.--
(1) No later than 30 days after the day on which a
sandbox participant exits the regulatory sandbox, the sandbox
participant shall submit a written report to the office and
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each applicable agency describing an overview of the sandbox
participant's demonstration, including any:
(i) incident of harm to consumers;
(ii) legal action filed against the participant as a
result of the participant's demonstration;
(iii) complaint filed with an applicable agency as a
result of the participant's demonstration; and
(iv) statutory or regulatory reform the sandbox
participant recommends as a result of the demonstration.
(2) No later than 30 days after an applicable agency
receives the quarterly reporting described in subsection (c)
or a written report from a sandbox participant as described
in subsection (e)(1), the applicable agency shall provide a
written report to the office on the demonstration that
describes any statutory or regulatory reform the applicable
agency recommends as a result of the demonstration.
Section 12. Regulatory relief web page.
(a) Duty of office.--The office shall create and maintain on
its publicly accessible Internet website a web page that invites
residents and businesses in this Commonwealth to make
suggestions regarding law and regulations that could be modified
or eliminated to reduce the regulatory burden of residents and
businesses in this Commonwealth.
(b) Quarterly compilation.--
(1) On at least a quarterly basis, the office shall
compile the results of suggestions from the web page and
provide a written report to the Governor and the General
Assembly that describes the most common suggestions.
(2) In creating the report described in paragraph (1),
the office and the advisory committee:
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(i) shall ensure that private information of
residents and businesses that make suggestions on the web
page is not made public; and
(ii) may evaluate the suggestions and provide
analysis and suggestions regarding which State law and
regulations could be modified or eliminated to reduce the
regulatory burden of residents and businesses in the
State while still protecting consumers.
Section 13. Effective date.
This act shall take effect in 60 days.
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