Frequently Asked Questions

Disclaimer: The following Frequently Asked Questions and corresponding answers are for informational purposes only and not intended to convey or constitute legal advice or opinions. The FAQ Info should not be construed as, and should not relied upon for, legal advice. You should seek private legal counsel for advice with respect to your specific matter. The FAQ Info is subject to change without notice. 


What is the Regulatory Sandbox?

The Regulatory Sandbox is a program established under Arizona law to foster innovation by enabling a business to obtain limited access to the Arizona market to test innovative financial products or services or other innovations without first obtaining a state license or other authorization that otherwise might be required. The Arizona Attorney General’s Office is responsible for administering the Sandbox. Once a business is allowed to enter the Sandbox, it may perform limited testing subject to certain restrictions depending on the product or service being tested.

What is FinTech?

FinTech is an abbreviated term for “financial technology.” FinTech encompasses new ways of providing traditional financial services, such as banking, payment systems, or investment advice. Accessing a bank account and making transfers via a smartphone app (commonly called mobile banking) is one example of a FinTech product. There are many different FinTech products, but each at its core delivers a financial service to a consumer in an innovative way.

Why was the Sandbox created?

Attorney General Mark Brnovich initiated the Sandbox legislation, sponsored by Representative Jeff Weninger, to encourage businesses to develop innovative products and services in the financial services sector. Creating the Sandbox has sent a strong message that Arizona is leading the way in fostering innovation aimed at making financial products and services more available, affordable, and safe for consumers.

Why does the Attorney General’s Office administer the Sandbox?

The Attorney General is the chief law enforcement officer in Arizona and responsible for consumer protection in the state. Because of this responsibility, the Attorney General’s Office is best situated to administer the Sandbox.

What role does the Attorney General’s Office play in the Sandbox?

The Attorney General’s Office accepts and reviews applications, consults with other state agencies, monitors businesses in the Sandbox, and if necessary, takes enforcement actions regarding any violations of law.

If I am accepted into the Sandbox, will the Attorney General’s Office provide me legal advice?

No. The Attorney General’s Office cannot provide legal advice and does not represent individuals or businesses applying to or admitted to the Sandbox. Legal advice should be sought from a private attorney.

How can a business apply to enter the Sandbox?

The application can be located on the website. An application fee of $500 must be paid to the Attorney General’s Office before an application is deemed submitted.

What kinds of products or services can be admitted into the Sandbox?

Each application must be for an innovative financial product or service or other innovation as defined in A.R.S. § 41-5601. Both existing Arizona licensees and non-licensed businesses may apply. Financial products and services are eligible for entry into the Sandbox including most types of credit extending services, such as peer-to-peer lending and online marketplace lending, would be eligible. Additionally, innovative products and services for money transmission and investment management also would be eligible, as well as certain blockchain or cyptocurrency products or services.

What products and services are not eligible for the Sandbox?

Securities trading, insurance products, or services that provide solely deposit-taking functions are not eligible to enter the Sandbox.

In addition, lending products and services governed by Title 6 or Title 44, Chapter 2.1 that seek to exceed the fee and interest rate limitations incorporated by reference in Title 41, Chapter 55 are beyond the scope of a test the Attorney General’s Office can legally approve under the law.

Do I have to be an Arizona resident/business to participate in the Sandbox?

No. However, Arizona law requires that Sandbox participants be subject to Arizona’s jurisdiction.

When will the Attorney General make a decision regarding a submitted application?

Within 90 days, the Attorney General will notify applicants of its decision. The Attorney General and applicant may mutually agree to extend this time period.

What is the duration of the Sandbox?

The Sandbox period lasts two years. Businesses may seek an extension of up to one year to obtain proper licensing and authorization to launch the product or service more widely.

What happens after the Sandbox?

Once the two-year period ends, Sandbox participants either must stop offering the product or obtain any applicable licenses to continue offering the product. Applicants to the Sandbox must detail a wind-down plan and exit strategy.

Does the Sandbox exempt participants from complying with all state and federal laws?

No. Although participants will be exempt from some Arizona laws (e.g. A.R.S. Title 6 and Title 44, Chapters 2.1 and 13), federal laws may apply irrespective of whether an applicant is in the Sandbox.  In addition, generally applicable state laws, such as the Consumer Fraud Act, still apply to Sandbox participants.  However, the law does provide that Sandbox participants are deemed to have appropriate state licenses for the purposes of any federal law requiring such state licenses.  Furthermore, because the products and services tested in the Sandbox are limited to Arizona consumers, participants possibly may qualify for existing exemptions from federal laws and regulations, such as Rules 147 and 147A for intrastate offerings under the Securities Act of 1933.  Sandbox participants ultimately are responsible for compliance with all applicable federal and state laws and should consult with counsel as necessary to ensure compliance.

If I am applying to enter in the Sandbox, can I partner with other businesses to provide the product or service?

Yes. Businesses can partner with others while in the Sandbox. The primary applicant must disclose its partner(s), the nature of the relationship(s), what the partner(s) will specifically do, and any other information that the Attorney General may need.

Is there a limit on the number of participants that can be active in the Sandbox?

There is no limit on the number of participants who may participate in the Sandbox at any one time.

Does participating in the Sandbox prevent doing business in other jurisdictions?

Participating in the Sandbox does not prohibit a business from operating in other jurisdictions or acting pursuant to and in accordance with the applicable laws of other jurisdictions.

If I am seeking the wider access to Arizona’s market as allowed under A.R.S. 41-5605(C), what kinds of information should I provide on the application?

Sandbox applicants seeking wider access must demonstrate adequate financial capitalization, risk-management processes, and oversight.  Depending on the specific innovation and business model, the necessary information and/or documentation will vary.  For money transmitters, the Attorney General’s Office will expect to see anti-money laundering and know-your-customer compliance demonstrated in an application.  For consumer lenders, adequate loan servicing, regulatory compliance, and contingency plans likely should be demonstrated.

What type of recordkeeping and reporting will be required for a Sandbox participant testing products or services?

All participants are required to keep records produced in the ordinary course of business. This includes but is not limited to: advertising materials, accounting workbooks, drafts of model contracts and forms, signed contracts and forms, communications between the business and consumers, data in its native format, and any metadata.  Depending on the product being offered, a participant might also need to make and maintain additional records, such as those required by 17 C.F.R. § 275.204-2 for investment advisors.  Sandbox participants will be expected to maintain and periodically may be required to produce records that show compliance with the disclosure, dollar, and consumer limit requirements found in A.R.S. § 41-5605. 

Do I need a bond or minimum net worth to be admitted for testing products or services as a money transmitter?

There is no set minimum bond or net worth requirement; however, each applicant must demonstrate that consumers will be protected for the duration of the test.  Applicants are free to propose a bond as a method of ensuring consumer protection.  The Attorney General’s Office will review applications on a case by case basis.  Examples of relevant factors in that review process include, but are not limited to:  the type of product or service being offered; the level of business being conducted in the test; the company’s financial condition; the existence of a surety bond; the company’s historical business activity; the projected volume of business to be conducted in Arizona; and the company’s internal policies and controls.

Are Sandbox participants testing products or services as a money transmitter exempt from the recordkeeping and reporting requirements prescribed by federal law?

No.  Depending on the product or service being offered and the dollar amount(s) involved, a Sandbox participant may be required to register as a “money service business” (defined by 31 C.F.R. § 1010.100(ff)) and develop, implement, and maintain an effective anti-money laundering program.  Particular transactions involving certain dollar amounts may also trigger recordkeeping and reporting requirements.  The foregoing are examples of what may be required and are not intended to constitute legal advice or to be an exhaustive list of all that may be required under federal law.  Legal advice should be sought from a private attorney.  Additional information may also be found at

Are Sandbox participants testing products or services as a money transmitter exempt from other state or foreign laws?

No.  Entry into the Sandbox allows money transmitter participants to conduct business activity in Arizona, similar to a licensed money transmitter or authorized delegate regulated by the Arizona Department of Financial Institutions, but on a more limited scale.  Participants that plan to operate outside of Arizona, whether directly or indirectly through an agent or business partner relationship, should seek private legal counsel regarding the local law of that jurisdiction.

By what criteria does the Attorney General evaluate applications?

In sum, the Attorney General evaluates applications holistically to determine the applicant’s ability to conduct a test that does not place undue risk on consumers.  In reviewing the applications, the Attorney General may consider factors including: capitalization; insurance or bonds and their terms; compliance or legal support; accounting practices; cash on hand; and the number and expertise of active advisors and key personnel.  Lacking in one or more of these areas is not necessarily dispositive against being admitted. For example, if a money transmitter business has little to no cash on hand, but has a substantial bond, then the Attorney General’s Office may consider that arrangement sufficient to protect consumers in light of the overall plan presented by an applicant.

What if I am a startup that doesn’t have a lot of cash or organization?

For applicants without many resources, entry into the Sandbox may be conditioned on accepting additional market restrictions that further lower consumer risk. For example, an applicant willing to limit its test to several hundred consumers likely would not need to show that it possesses extensive financial records, multiple experts on staff, or substantial liquidity.

How will the Attorney General monitor testing in the Sandbox?

The Attorney General will incorporate multiple oversight systems. Participants may be required to provide periodic updates that would be established upon an applicant’s entry into the Sandbox.  Updates will be fashioned to provide information about a test’s progress and compliance with the Sandbox terms and restrictions. For example, consumer lending products likely would be required to provide information regarding the number of originated loans made, interest rates on the loans, consumer defaults, delinquent payments, and the average time period for consumers to pay off the loan. For money transmitters, information might include the most frequent destinations for remittances, the average amount of transmissions, any suspicious activity, and the number of transmissions made.  Additionally, the Attorney General will collect and monitor complaints from consumers using products in the Sandbox.

I heard other jurisdictions have Sandboxes. Is Arizona working with those jurisdictions?

The law allows the Attorney General’s Office to enter into agreements with other jurisdictions to form cooperative arrangements regarding each jurisdiction’s Sandbox.  If any such agreements are made, the Attorney General’s Office will announce them and provide information as necessary.

What should I do if I have a complaint regarding a test in the Sandbox?

Consumers using a product or service being tested in the Sandbox can file a complaint at

If I have a general question about the Sandbox, who should I contact?

For media inquiries, please contact Katie Conner at [email protected]. Send general inquiries to [email protected].