Utah Sandbox Inspires Similar Regulatory Initiatives in Canada and other States
The regulatory sandbox model
A regulatory sandbox is a policy tool through which organizations can offer and test new models or services to assess marketability and impact, and to inform future policymaking while maintaining consumer protection. Regulatory sandboxes involve risk-based regulation and include one or more regulatory models. The regulatory sandbox model was first developed in the United Kingdom for experimentation within the fintech industry. The use of the regulatory sandbox model has since expanded to other industries, such as insurance, agriculture technology, and AI. Industry-neutral regulatory sandboxes have also been proposed.
Utah launches the first sandbox regulating the delivery of legal services in the United States
In 2020, the state of Utah pioneered the use of a regulatory sandbox in the legal space. To develop and launch the sandbox, the Utah Supreme Court created the Utah Office of Legal Services Innovation (OLSI). The OLSI allows entities to offer innovative forms of legal services in a controlled environment outside the bounds of the unauthorized practice of law and professional conduct rules governing the practice of law. Entities can organize in innovative ways—such as having professionals without a law license co-own a law firm—and can use alternative legal service providers—human or technology—if the firm uses an innovative approach to solving legal issues for Utahns who are not currently being served.
Utah’s legal regulatory Sandbox operationalizes a novel form of legal regulation that allows participants to test innovative legal service delivery models in a controlled environment, identify potential risks to consumers at the outset, and monitor and address those risks if needed. The Sandbox is based on a model that IAALS developed in 2019 in collaboration with experts representing perspectives across the legal profession. The success of the Sandbox is contingent on its ability to adhere to an explicitly defined set of objectives, principles, and concepts that are consistent with its regulatory approach. In establishing the Sandbox, the Utah Supreme Court articulated a regulatory objective and promulgated a set of regulatory principles. The Utah Supreme Court has clearly laid out the overarching goal of the Sandbox: achieving a market for legal services in Utah that is “well-developed, high-quality, innovative, affordable, and competitive” through this novel approach to legal regulation.
Canadian provinces take notice
Noticing the benefits of Utah’s Sandbox model, several provinces in Canada have adopted similar regulatory programs for their legal service providers.
Ontario
Launched in 2021, Ontario was the first Canadian province to implement a legal regulatory sandbox. Known as the Access to Innovation (A2I) pilot program, Ontario’s sandbox includes a technology component requirement and involves an approval process and reporting requirements for securing and maintaining participation in the program. The A2I project is open to any type of legal service provider: licensed lawyer or paralegal, law firm, business, or not-for-profit organization. Each approved participant in the A2I program must maintain and operate its own complaint resolution process. The Law Society of Ontario (LSO) evaluates each participant’s process to ensure that it can appropriately address issues that may arise, and retains the authority to suspend or revoke a participant’s approval if serious problems arise. Many useful business-to-business legal technology tools have been developed by lawyers over the years outside of the sandbox. By removing the risk of disciplinary action through the A2I program, the LSO hopes that lawyers will now be encouraged to turn their attention to the development of innovative direct-to-consumer legal tech applications as well.
According to the most recent report on the Ontario Sandbox Initiative, there are 11 entities currently participating in the program and an additional 26 applications under review. Participating entities have built businesses with a wide range of focus areas and target markets. Examples include online estate planning, will planning, power of attorney documents, estate settlement processes, digital real estate and homebuyer transaction services, corporate services, and entrepreneurial services.
British Columbia
Also in 2021, British Columbia began their innovative sandbox initiative, “to improve access to justice by improving access to legal advice and assistance,” with a focus on licensing paralegals. British Columbia’s Innovation Sandbox is driven by the goal of increasing access to justice in every sense of the word, including a focus on who is accessing the legal services, such as single mothers or members of the middle class who are otherwise priced out of the legal system. One current innovation in the British Columbia program is a web-based app to assist with negotiation agreements and online form-filing assistance.
There are currently 56 participating entities in the British Columbia innovative sandbox initiative. In British Columbia, sandbox entities are evaluated monthly, including through monitoring and reporting. For members of the public who have concerns, there are several channels available to submit reports.
Alberta
Inspired by the Utah Sandbox model, in February 2022 the Canadian province of Alberta launched their regulatory sandbox initiative, “a space where current regulations on legal service delivery can be relaxed to encourage innovation.” In Alberta, lawyers must be involved in the delivery of legal services, but the services can be delivered by any type of entity, including an entity that is partly or wholly owned by people not licensed to practice law. Legal advice and services being delivered using technology also require a certain level of lawyer involvement. The sandbox environment supports potential providers in testing new ideas and models for the delivery of legal services in a controlled environment, with appropriate guidance and oversight. Approved applicants generally operate their delivery model for a pilot period of two years, but this time frame may vary depending on the requirements of each participant. Participants are required to provide periodic reports to the Law Society of Alberta consistent with the objectives and nature of the delivery model. These reports consist of broad, general information such as issues that have arisen, consumer feedback, and general observations about the operation of the delivery model.
There are currently 11 approved participants in the Alberta regulatory sandbox initiative. Services offered by existing entities include digital document platforms, digital signature services, identification documents services, family law services, immigration services, and case management for disability benefits. Public citizens with concerns about participating sandbox members can file a complaint online.
Manitoba
Most recently, in 2024, the Canadian province of Manitoba launched a regulatory sandbox pilot program, the objective of which is to “improve access to justice by improving access to legal advice and assistance.”
This initiative is open to any type of legal service provider: persons who are not lawyers, businesses, not-for-profit organizations, lawyers, and law firms. The sandbox will enable individuals, businesses, or organizations not currently authorized to practice law to provide limited and specific services for legal advice and assistance within a structured environment.
Participating providers within the Manitoba sandbox pilot program include an organization serving refugee clients, a community organization working with landlord/tenant disputes, and a family law resolution group assisting individuals who do not qualify for free legal aid to utilize alternative dispute resolution methods. Entities who do not effectively deliver on their proposals or who fail to comply with the conditions imposed are subject to removal from the sandbox.
New sandbox proposals spring up in the United States
Washington
By pilot testing “entity regulation” and allowing innovative business models to offer legal services under carefully monitored conditions, the Washington Supreme Court Practice of Law Board and the Washington State Bar Association are hoping to model access to justice initiatives through their regulatory sandbox framework. “Entity regulation” refers to a framework that regulates entities, like non-profits or businesses, as a whole (as opposed to regulating individual practitioners, like lawyers, within those entities). In September 2024, these two entities submitted a draft order and associated public comment to the Washington Supreme Court and requested approval of the Pilot Test Program. Recognizing the transformative impact of online services in the legal landscape, much of the goal of Washington’s sandbox framework is to harness the power of technology to increase access to justice. By encouraging participants such as financial advisors and software developers to join in the sandbox, technological innovation efforts can meet access to justice initiatives.
Minnesota
The state of Minnesota has recently taken steps toward launching a generative AI regulatory sandbox (the Access to Justice Legal Sandbox) to regulate legal technologies and clear a pathway for professionals without a law license to create legal assistance tools to solve the access to justice gap. In June 2024, the Minnesota State Bar Association AI and the Law Working Group released a report that included a recommendation for the creation of a large language model (LLM) sandbox. The LLM sandbox would provide a controlled environment for entities to use large language models in innovative ways, without the fear of unauthorized practice of law prosecution. According to the report, areas ripe for innovation in Minnesota include housing law, immigration law, and conciliation processes.
Indiana
In August 2024, the Indiana Supreme Court’s Commission on Indiana’s Legal Future released a set of interim recommendations, one of which was to create a regulatory sandbox program to address the state’s attorney shortage. According to the proposal, Indiana’s regulatory sandbox would be modeled after Utah’s regulatory sandbox and would test initiatives for nontraditional services which may otherwise be considered the unauthorized practice of law. In October 2024, the Indiana Supreme Court approved many of the recommendations in the Interim Report, including the sandbox recommendation.
Conclusion
Regulatory sandbox frameworks allow for a wide range of legal models and legal service providers to participate in a process that is otherwise riddled with regulation and barriers to entry. Following the approach and example of the Utah sandbox, several Canadian provinces have now shown through their work that the access to justice crisis can be mitigated through such a framework, paving the pathway to success for U.S. states who are gearing up to follow.
