How Sandbox Laws Make Space for AI Developments

AI has transformative potential across many industries. However, some industries are sensitive to Silicon Valley’s “move fast and break things” mentality. These sectors include healthcare, finance, and critical infrastructure. Each carries the potential for transformation and the potential for disaster. In these cases, governments are left with a catch-22: either ban AI from these sectors and miss out on innovation, or allow companies to develop and market products that may put the public at risk. Some states are looking to cut this Gordian knot with “sandbox laws.”

Sandbox laws are growing increasingly popular and allow AI companies to develop systems in controlled environments. These laws provide liability shields for companies during the development and pilot phases of AI projects. In return, developers consent to increased government oversight. Recently, Utah authorized three pilots for AI development in healthcare. A recent Holland & Knight memo provides details on the function of these regulatory mitigation agreements (RMAs):

“The Healthcare Pilots offer insight into the types of issues that may arise for companies considering participation in Utah’s sandbox program or developing similar healthcare applications in other states. Among other things, the RMAs illustrate how the app’s patient population, clinical activity and the limits of the proposed AI use may be defined, as well as how professional review requirements, adverse event reporting requirements and criteria excluding certain decisions from AI review may be structured. Questions regarding how payers will reimburse AI-powered services may also be relevant in an environment where payment models are evolving significantly more slowly than healthcare technology. The relevance of these and other issues will depend oneach company’’s particular facts and circumstances.”

Several states have adopted sandbox laws in recent years. The trend may ultimately be mirrored at the federal level, as the government has expressed interest in working closely with AI companies. These RMAs are testing the future of AI in Utah healthcare.  Similarly, the future of sandbox laws will largely depend on the successes or failures of current state test cases.