Pub. 9 2019 Issue 3

15 ISSUE 3. 2019 without a credit check and offer affordable, consumer-friendly vehicle title loans with an APR cap of 20 percent. 4. Align Income Share Funding, Inc. (admitted March 20, 2019) is developing a business model for income-sharing agreements that provide qualified consumers with a fixed amount of money in exchange for a percentage of the consumer’s future income over a scheduled period of time, subject to contingencies in- volving periods of unemployment or lowered income. 5. ENIAN, Ltd. (admitted May 8, 2019) is building a platform to help investors compare potential investment opportunities by providing an algorithm-based evaluation tool for potential solar and wind power projects looking for funding. 6. Verdigris Holdings (admitted May 8, 2019) offers a solution that combines custom technology and industry expertise to deliver simple transactional financial services at a low cost to unbanked people and the companies that serve them. 7. Zona Digital Commodity, LLC (d/b/a Alta) (admitted July 11, 2019) is a financial services “club” using money transmission services in connection with the sale of digital assets aimed at providing a cash management solution for licensed medical marijuana providers. Reaction to the Sandboxes Proponents of the fintech and proptech sandboxes tout the bene - fits of these initiatives. Sweetbridge CEO Scott Nelson said, “The Arizona Sandbox makes it possible for startups, like Sweetbridge, to test their products quickly in a controlled environment without the cost and time delay that is typical for licensing new financial products. The Sandbox is the perfect environment to develop and iterate new financial technology in a way that is safe for consumers but also more feasible for fintech innovators.” Grain Co-founder and COO, Carl-Alain Memnon, noted the compa - ny “sought to join the Arizona Fintech Sandbox because it provided the unique opportunity for us to beta-test our innovation in the market. With guidance from the AG’s office, we were able to more efficiently navigate the regulatory requirements to go to market. Ac - cess to the Arizona market has been invaluable to both our product development and product market analysis. It has allowed us to work closely with those consumers to iterate on our offering and more specifically tailor it to actual consumer needs. Ultimately, we hope to graduate from the sandbox with a consumer centered product that improves the financial health of individuals across the country.” Sandra Watson, President and CEO of the Arizona Commerce Authority, noted, “Under Gov. Ducey’s leadership, and with the support of the Arizona legislature, our state is consistently first in advancing policies that foster innovation and support economic growth. Our first-in-the-nation fintech sandbox, laying the ground - work for 5G technology, leading the automated vehicle revolu - tion, and embracing the sharing economy, have earned Arizona a reputation as one of the most forward-thinking states in the nation. Passage of the proptech bill is certain to contribute to the excellent momentum and job growth in Arizona’s tech industry.” Individual cities have robust programs to target and attract potential fintech companies to Arizona. Jeanine Jerkovic, Director of the City of Surprise Economic Development Department, said, “As a com- munity which launched an innovation center with global services at the AZ TechCelerator as a primary economic development strategy, it is always exciting when the State of Arizona takes a leadership role in innovation. Reducing cost barriers for global companies looking for a U.S. entry point is an important way to demonstrate that Arizona understands the challenges that these companies face.” Despite the overwhelming support from the business community, criticisms have been levied against the fintech and proptech sandbox - es. Representatives from the William E. Morris Institute for Justice, Arizonans for Responsible Lending, the Southwest Center for Eco - nomic Integrity, the Society of St. Vincent DePaul, and the Arizona Coalition to End Sexual and Domestic Violence testified in oppo - sition to these proposals, particularly with regard to consumer risk. Opponents questioned the efficacy of allowing businesses – without a license – to offer financial products and services to consumers; ob - jected to authorizing money transmission outside the requirements of the statute, including state anti-money laundering reporting; opposed authorizing auto title lending products and services and allowing businesses to exceed consumer caps; and criticized excluding sand - box records from the state’s public records law. 29 Some questioned whether the sandboxes offer a backdoor for fraud - sters and predatory lenders who often prey on the vulnerable mem- bers of our community. Consumer advocate Jean Ann Fox, speak - ing before the House Commerce Committee in opposition to HB 2177, said she is concerned that the fintech sandbox “undermines consumer protection; it creates duplicate regulation, and it sets up the opportunity for regulatory arbitrage as companies decide who they would like to have regulate them, the Department of Financial Institutions, the Corporation Commission, or the Attorney General’s Office.” As she put it: “Toddlers play in sandboxes and grownups play by the rules.” 30 Sandbox proponents disagree that sandboxes enable bad actors. They believe sandboxes encourage innovation, which in turn has the potential to put bad actors out of business by introducing new and competitive products into the market and placing more power in the hands of consumers. Evan Daniels, Fintech Sandbox Counsel at the Arizona Attorney General’s Office, said, “Being approved to come into the sandbox is not license to do whatever you want. We pay close attention to how proposed tests will be administered and what consumers will encounter both when the test begins and beyond. With that level of involvement on our part, we think that makes the sandbox a less than ideal environment for scams and fraud.” Arizona Lawyers can Serve Fintech and Proptech Companies Arizona lawyers provide important counsel to Arizona startups. Many local and out-of-state companies seeking to participate in the Continued on Page 16