With Darcy W.E. Allen and Aaron M. Lane. Available at SSRN.
Abstract: Regulatory sandboxes are widely available but often underused. This paper theoretically reframes sandboxes as exercises in default-rule design, which not only explains their low uptake but also provides a path forward for reform. Most existing sandboxes are closed by default: experimentation is unlawful unless the regulator grants permission, and entry is mediated through application, approval and discretionary assessment. These procedures function as costly altering rules that make the prohibitory baseline sticky. The result is to screen out frontier innovators while attracting firms already close to compliance. We propose an alternative model of open sandboxes implemented as default-in safe harbours, under which eligible firms are presumed protected from enforcement of specified authorisation requirements by default, subject to registration, disclosure, conditions and revocation. This design shifts sandboxes from permissioned exceptions to legal infrastructure that enables experimentation unless and until regulators intervene.