II 

118TH CONGRESS 

2D SESSION S. 4951 

To provide for regulatory sandboxes that permit certain persons to experiment 

with artificial intelligence without expectation of enforcement actions. 

IN THE SENATE OF THE UNITED STATES 

AUGUST 1, 2024 

Mr. ROUNDS (for himself and Mr. HEINRICH) introduced the following bill; 

which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs 

A BILL 

To provide for regulatory sandboxes that permit certain persons to experiment with artificial intelligence without 

expectation of enforcement actions. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Unleashing AI Innova5 tion in Financial Services Act’’. 

6 SEC. 2. USE OF ARTIFICIAL INTELLIGENCE BY REGULATED 

7 FINANCIAL ENTITIES. 

8 (a) DEFINITIONS.—In this section: 


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1 (1) AI TEST PROJECT.—The term ‘‘AI test 

2 project’’ means a financial product or service that 

3 falls under the jurisdiction of a financial regulatory 

4 agency— 

5 (A) substantially uses artificial intelligence; 

6 and 

7 (B) is or may be subject to a Federal regu8 lation or Federal statute. 

9 (2) APPROPRIATE FINANCIAL REGULATORY

10 AGENCY.—The term ‘‘appropriate financial regu11 latory agency’’ means— 

12 (A) the appropriate Federal banking agen13 cy, as defined in section 3 of the Federal De14 posit Insurance Act (12 U.S.C. 1813), with re15 spect to regulated entities described in sub16 section (q) of that section; 

17 (B) the Securities and Exchange Commis18 sion, with respect to— 

19 (i) any broker or dealer that is reg20 istered with the Commission under the Se21 curities Exchange Act of 1934 (15 U.S.C. 

22 78a et seq.), with respect to the activities 

23 of the broker or dealer that require the 

24 broker or dealer to be registered under 

25 that Act; 


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1 (ii) any investment company that is 

2 registered with the Commission under the 

3 Investment Company Act of 1940 (15 

4 U.S.C. 80a–1 et seq.), with respect to the 

5 activities of the investment company that 

6 require the investment company to be reg7 istered under that Act; 

8 (iii) any investment adviser that is 

9 registered with the Commission under the 

10 Investment Advisers Act of 1940 (15 

11 U.S.C. 80b–1 et seq.), with respect to the 

12 investment advisory activities of such com13 pany and activities that are incidental to 

14 such advisory activities; 

15 (iv) any clearing agency registered 

16 with the Commission under the Securities 

17 Exchange Act of 1934 (15 U.S.C. 78a et 

18 seq.), with respect to the activities of the 

19 clearing agency that require the agency to 

20 be registered under such Act; 

21 (v) any nationally recognized statis22 tical rating organization registered with 

23 the Commission under the Securities Ex24 change Act of 1934 (15 U.S.C. 78a et 

25 seq.); 


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1 (vi) any transfer agent registered with 

2 the Commission under the Securities Ex3 change Act of 1934 (15 U.S.C. 78a et 

4 seq.); 

5 (vii) any exchange registered as a na6 tional securities exchange with the Com7 mission under the Securities Exchange Act 

8 of 1934 (15 U.S.C. 78a et seq.); 

9 (viii) any national securities associa10 tion registered with the Commission under 

11 the Securities Exchange Act of 1934 (15 

12 U.S.C. 78a et seq.); 

13 (ix) any securities information proc14 essor registered with the Commission 

15 under the Securities Exchange Act of 1934 

16 (15 U.S.C. 78a et seq.); 

17 (x) the Municipal Securities Rule18 making Board established under the Secu19 rities Exchange Act of 1934 (15 U.S.C. 

20 78a et seq.); 

21 (xi) the Public Company Accounting 

22 Oversight Board established under the 

23 Sarbanes-Oxley Act of 2002 (15 U.S.C. 

24 7211 et seq.); 


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1 (xii) the Securities Investor Protection 

2 Corporation established under the Securi3 ties Investor Protection Act of 1970 (15 

4 U.S.C. 78aaa et seq.); and 

5 (xiii) any security-based swap execu6 tion facility, security-based swap data re7 pository, security-based swap dealer or 

8 major security-based swap participant reg9 istered with the Commission under the Se10 curities Exchange Act of 1934 (15 U.S.C. 

11 78a et seq.), with respect to the security12 based swap activities of the person that re13 quire such person to be registered under 

14 such Act; 

15 (C) the Bureau of Consumer Financial 

16 Protection, with respect to a covered person, as 

17 defined in section 1002 of the Consumer Finan18 cial Protection Act of 2010 (12 U.S.C. 5481), 

19 that is not described in subparagraph (A), (B), 

20 (C), (E), or (F) of this paragraph; 

21 (D) the National Credit Union Administra22 tion, with respect to an insured credit union; 

23 and 

24 (E) the Federal Housing Finance Agency, 

25 with respect to Federal Home Loan Banks or 


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1 the Federal Home Loan Bank System, and 

2 with respect to the Federal National Mortgage 

3 Association or the Federal Home Loan Mort4 gage Corporation. 

5 (3) ARTIFICIAL INTELLIGENCE.—The term ‘‘ar6 tificial intelligence’’ has the meaning given the term 

7 in section 5002 of the National Artificial Intelligence 

8 Initiative Act of 2020 (15 U.S.C. 9401). 

9 (4) FEDERAL SECURITIES LAWS.—The term 

10 ‘‘Federal securities laws’’ means— 

11 (A) the Securities Act of 1933 (15 U.S.C. 

12 77a et seq.); 

13 (B) the Securities Exchange Act of 1934 

14 (15 U.S.C. 78a et seq.); 

15 (C) the Sarbanes-Oxley Act of 2002 (15 

16 U.S.C. 7201 et seq.); 

17 (D) the Trust Indenture Act of 1939 (15 

18 U.S.C. 77aaa et seq.); 

19 (E) the Investment Company Act of 1940 

20 (15 U.S.C. 80a–1 et seq.); 

21 (F) the Investment Advisers Act of 1940 

22 (15 U.S.C. 80b–1 et seq.); and 

23 (G) the Jumpstart Our Business Startup 

24 Act (Public Law 112–106; 126 Stat. 306). 


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1 (5) FINANCIAL PRODUCT OR SERVICE.—The 

2 term ‘‘financial product or service’’— 

3 (A) has the meaning given the term in sec4 tion 1002 of the Consumer Financial Protection 

5 Act of 2010 (12 U.S.C. 5481); 

6 (B) includes— 

7 (i) activities that are financial in na8 ture, as defined in section 4(k)(4) of the 

9 Bank Holding Company Act of 1956 (12 

10 U.S.C. 1843(k)(4)); 

11 (ii) any financial product or service 

12 provided by a person regulated by the 

13 Commission, as defined in 1002 of the 

14 Consumer Financial Protection Act of 

15 2010 (12 U.S.C. 5481); and 

16 (iii) includes the offer or sale of any 

17 security subject to the Federal securities 

18 laws; and 

19 (C) does not include the business of insur20 ance. 

21 (6) FINANCIAL REGULATORY AGENCY.—The 

22 term ‘‘financial regulatory agency’’ means— 

23 (A) the Board of Governors of the Federal 

24 Reserve System; 


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1 (B) the Federal Deposit Insurance Cor2 poration; 

3 (C) the Office of the Comptroller of the 

4 Currency; 

5 (D) the Securities and Exchange Commis6 sion; 

7 (E) the Bureau of Consumer Financial 

8 Protection; 

9 (F) the National Credit Union Administra10 tion; and 

11 (G) the Federal Housing Finance Agency. 

12 (7) REGULATED ENTITY.—The term ‘‘regulated 

13 entity’’ means an entity regulated by any financial 

14 regulatory agency. 

15 (b) REGULATORY SANDBOXES.— 

16 (1) ESTABLISHMENT.—Each financial regu17 latory agency shall establish a regulatory sandbox 

18 that allows regulated entities to experiment with AI 

19 test projects without unnecessary or unduly burden20 some regulation or expectation of retroactive en21 forcement actions. 

22 (2) APPLICATIONS.— 

23 (A) SUBMISSION.— 

24 (i) IN GENERAL.—A regulated entity 

25 may submit to the appropriate financial 


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1 regulatory agency an application, on a 

2 form determined by the appropriate finan3 cial regulatory agency, to engage in an AI 

4 test project. 

5 (ii) CONTENTS.—An application sub6 mitted under clause (i) shall include— 

7 (I) a description of the AI test 

8 project proposed to be carried out by 

9 the regulated entity; 

10 (II) an alternative compliance 

11 strategy that— 

12 (aa) identifies a regulation 

13 issued by the appropriate finan14 cial regulatory agency or a Fed15 eral statute enforced by the ap16 propriate financial regulatory 

17 agency that the regulated entity 

18 requests to be waived or modi19 fied; and 

20 (bb) proposes an alternative 

21 method for the regulated entity 

22 to comply with the regulation or 

23 statute, including an explanation 

24 as to why the alternative method 


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1 is essential to the operation of 

2 the entity; 

3 (III) a demonstration that, under 

4 the strategy described in subclause 

5 (I), the AI test project— 

6 (aa) would serve the public 

7 interest, improve consumer ac8 cess to a financial product or 

9 service, or promote consumer 

10 protection; 

11 (bb) would enhance effi12 ciency or operations, foster inno13 vation or competitiveness, im14 prove risk management and secu15 rity, or enhance regulatory com16 pliance; 

17 (cc) would not present a sys18 temic risk to the financial system 

19 of the United States; 

20 (dd) is consistent with the 

21 purposes of the anti-money laun22 dering and countering the financ23 ing of terrorism obligations under 

24 subchapter II of chapter 53 of 

25 title 31, United States Code; and 


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1 (ee) would not present a na2 tional security risk to the United 

3 States; 

4 (IV) a proposed date on which 

5 the AI test project would terminate 

6 and explain why such termination 

7 date would be appropriate; 

8 (V) proposed limitations on the 

9 size, scope, and growth of the AI test 

10 project; and 

11 (VI) an estimate of the economic 

12 impact of the AI test project if ap13 proved. 

14 (iii) JOINT APPLICATIONS.—Two or 

15 more regulated entities may submit a joint 

16 application to the same financial regu17 latory agency under clause (i). 

18 (iv) REGULATIONS AND STATUTES OF

19 OTHER AGENCIES.— 

20 (I) IN GENERAL.—A regulated 

21 entity may submit an application 

22 under this subparagraph that includes 

23 an alternative compliance strategy for 

24 a regulation issued by or a Federal 

25 statute enforced by a financial reguVerDate Sep 11 2014 16:02 Aug 31, 2024 Jkt 049200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S4951.IS S4951

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1 latory agency that is not the appro2 priate financial regulatory agency for 

3 the regulated entity. 

4 (II) REQUIREMENTS.—An appli5 cation described in subclause (I) shall 

6 be subject to the same requirements 

7 as an application described in clause 

8 (ii), except that— 

9 (aa) the regulated entity 

10 shall submit the application to 

11 the appropriate financial regu12 latory agency and the financial 

13 regulatory agency that issued the 

14 regulation or enforces the statute 

15 or regulation that is the subject 

16 of the alternative compliance 

17 strategy; and 

18 (bb) the AI test project may 

19 not take effect unless the appro20 priate financial regulatory agency 

21 and any other financial regu22 latory agency that issued the reg23 ulation or enforces the statute 

24 that is the subject of the alter25 native compliance strategy jointly 


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1 approve the application using the 

2 process described in subpara3 graph (B). 

4 (v) NOTICE.—A regulated entity that 

5 is regulated or supervised by more than 1 

6 financial regulatory agency shall provide 

7 notice of any application submitted to the 

8 appropriate financial regulatory agency 

9 under this section to each financial regu10 latory agency by which it is regulated or 

11 supervised not later than 5 business days 

12 after the entity submits the application to 

13 the appropriate financial regulatory agen14 cy. 

15 (B) AGENCY REVIEW.— 

16 (i) IN GENERAL.—Except as provided 

17 in clause (v), not later than 90 days after 

18 the date on which an application is sub19 mitted to the appropriate financial regu20 latory agency under subparagraph (A), the 

21 appropriate financial regulatory agency 

22 shall— 

23 (I) review the application; and 

24 (II) submit to the applicant in 

25 writing a determination of the agency. 


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1 (ii) APPROVAL.— 

2 (I) IN GENERAL.—If the appli3 cant shows that it is more likely than 

4 not that the application meets the re5 quirements for establishing an alter6 native compliance strategy and meets 

7 the requirements described in sub8 paragraph (A)(ii)(II), the agency shall 

9 approve the application and notify the 

10 applicant in writing of— 

11 (aa) the regulation or Fed12 eral statute that is the subject of 

13 the alternative compliance strat14 egy; 

15 (bb) the terms of the alter16 native compliance strategy for 

17 the AI test project; 

18 (cc) the date on which the 

19 AI test project will terminate; 

20 (dd) any limitations on the 

21 size, scope, or growth of the AI 

22 test project; and 

23 (ee) any additional limita24 tions or conditions on the AI test 

25 project, as determined by the apVerDate Sep 11 2014 16:02 Aug 31, 2024 Jkt 049200 PO 00000 Frm 00014 Fmt 6652 Sfmt 6201 E:\BILLS\S4951.IS S4951

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1 propriate financial regulatory 

2 agency. 

3 (II) EFFECT OF APPROVAL.—Ex4 cept as provided in subclause (III), 

5 beginning on the date on which an ap6 plication submitted under subpara7 graph (A) is approved and ending on 

8 the date described in subclause 

9 (I)(cc)— 

10 (aa) the appropriate finan11 cial regulatory agency may en12 force a regulation or Federal 

13 statute described in subclause 

14 (I)(aa) only in the manner set 

15 out in the alternative compliance 

16 strategy described in subclause 

17 (I)(bb); and 

18 (bb) a financial regulatory 

19 agency that is not the appro20 priate financial regulatory agency 

21 may not enforce a regulation or 

22 Federal statute described in sub23 clause (I)(aa) with respect to the 

24 conduct of the AI test project by 

25 the regulated entity. 


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1 (III) ENFORCEMENT BY AN2 OTHER FINANCIAL REGULATORY

3 AGENCY.—A financial regulatory 

4 agency other than the appropriate fi5 nancial regulatory agency that ap6 proves an application under subpara7 graph (A)(iv) may enforce a regula8 tion or Federal statute described in 

9 subclause (I)(aa) if the alternative 

10 compliance strategy described in sub11 clause (I)(bb) provides for enforce12 ment by such financial regulatory 

13 agency. 

14 (IV) RULE OF CONSTRUCTION.— 

15 Nothing in this clause may be con16 strued to limit the authority of a fi17 nancial regulatory agency to take an 

18 enforcement action against a regu19 latory entity with respect to fraud re20 lating to an AI test project. 

21 (iii) DENIAL.— 

22 (I) IN GENERAL.—If an agency 

23 denies an application submitted under 

24 subparagraph (A), the agency— 


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1 (aa) shall submit to the ap2 plicant a written notice explain3 ing the reason for denial, includ4 ing evidence that the applicant 

5 did not satisfy the requirements 

6 for establishing an alternative 

7 compliance strategy and the 

8 baseline used by the agency to 

9 measure the likely economic con10 sequences of rejecting the appli11 cation; and 

12 (bb) may not take an en13 forcement action against the ap14 plicant earlier than the date that 

15 is 30 days after the date on 

16 which the agency submits the 

17 written notice described in item 

18 (aa). 

19 (II) RESUBMITTALS.—Each time 

20 an application submitted under sub21 paragraph (A) is denied, the regulated 

22 entity may submit another application 

23 if the application is not substantially 

24 similar to the one denied. 


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1 (III) INJUNCTIVE RELIEF.—If a 

2 financial regulatory agency determines 

3 an AI test project presents an imme4 diate danger to consumers or presents 

5 a risk to financial markets, the agency 

6 may file a civil action in an appro7 priate court seeking to enjoin such 

8 project. 

9 (IV) RULE OF CONSTRUCTION.— 

10 Nothing in this clause may be con11 strued to limit the authority of a fi12 nancial regulatory agency to take an 

13 enforcement action against an appli14 cant with respect to fraud relating to 

15 the AI test project. 

16 (iv) EXTENSION.—If the financial reg17 ulatory agency needs additional time, the 

18 agency may vote to extend the application 

19 deadline by 90 days. After the expiration 

20 of the 90-day period, if the agency has not 

21 made a determination on the application, 

22 the application will automatically be 

23 deemed approved and effective. 


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1 (C) DATA SECURITY.—All data supplied by 

2 sponsors of AI test projects submitted under 

3 this section shall be stored in a secure manner. 

4 (D) REGULATIONS.—Not later than 180 

5 days after the date of enactment of this Act, 

6 each financial regulatory agency shall promul7 gate regulations that— 

8 (i) shall be published in the Federal 

9 Register and provide a 45-day period for 

10 public notice and comment; 

11 (ii) include— 

12 (I) procedures for modifying the 

13 AI test projects that are approved by 

14 the agency; 

15 (II) consequences for failure to 

16 comply with set terms; 

17 (III) termination dates not ear18 lier than 1 year after the date on 

19 which AI test projects are approved; 

20 (IV) procedures to extend the 

21 termination date described in sub22 clause (III); 

23 (V) procedures for confiden24 tiality; and 


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1 (VI) procedures for coordinating 

2 decisions relating to applications sub3 mitted jointly by multiple regulated 

4 entities or applications submitted to 

5 more than one financial regulatory 

6 agency. 

7 (c) REPORT.—Each financial regulatory agency shall 

8 submit to the Committee on Banking, Housing, and 

9 Urban Affairs of the Senate and the Committee on Finan10 cial Services of the House of Representatives an annual 

11 report on the outcomes of AI test projects. 

12 (d) REGULATIONS.—After approving not fewer than 

13 1 AI test project, an agency may promulgate regulations, 

14 after providing a notice and an opportunity for public 

15 comment, other AI activities or products that qualify as 

16 AI test projects. 

Æ 


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