Emerging Ideas and the Sharing Economy

Introduction

Emerging innovation in a free society springs out of the restless yearning for newer, better, and faster ways. While fast-emerging new forms of competition may please consumers, they tend to upset existing businesses and worry local and state officials about unregulated providers and services. So, technological change often leads to a rush to regulate.

Artificial intelligence (AI) is truly transformative technology, but like any other disruptive innovation, it presents new challenges to society and policymakers. AI offers extraordinary benefits in complex tasks — from managing traffic systems, balancing electrical grids, to diagnosing diseases, and even to such things as writing songs, planning a vacation, or choosing the best route to drive. It also offers multiple ways for governments to become more efficient. At the same time, AI is seen as a serious threat to jobs, personal privacy, and academic integrity.

The temptation for policymakers is to react to emerging technology with hasty laws and overregulation, which invariably blunt the good that such technologies could bring about for society and the economy. Abusing AI to harm others would still run afoul of laws against libel, fraud, and other criminal acts, but jumping the gun on AI regulation risks violating people’s right to free speech. AI mandates are problematic for many reasons, not the least of which is that AI systems often transcend state borders. Even so, in 2025, state legislatures considered over 1,000 different bills concerning AI.

In June 2015, the Federal Trade Commission (FTC) held a workshop on the “sharing economy” to address the sudden proliferation of new business models built around online and smartphone-based applications. The workshop examined the regulatory, competitive, consumer protection, and other economic issues of these emerging marketplaces, and it received over 2,000 public comments in response. The FTC ultimately recommended a cautionary approach to regulation, prescribing it “only when there is evidence that regulation is needed” and advising that it be “narrowly tailored” and “no more restrictive than necessary.” That same approach should apply to AI technologies as well.

Ill-conceived regulations can persist and have ongoing negative effects on local economies, consumers, and entrepreneurs. With AI and other emerging ideas and innovations, policymakers should still adhere to the wisdom of the Hippocratic Oath: “First, do no harm.”

Instead of rushing to regulate, policymakers should be on the lookout for ways to undo past harms — to remove or lessen persistent regulatory obstacles already blocking the way to existing businesses as well as new ones. For example, local entry regulations and public service restrictions can stifle business opportunities in cities and counties and vary wildly from one jurisdiction to the next. Outdated zoning, rent controls, and other regulations can prevent people in high-demand urban settings from providing all kinds of affordable housing arrangements.

Key Facts

• In 2021, the General Assembly created a regulatory sandbox for finance and insurance technologies. The law waives some regulations for newly emerging products and services for 24 months to give them a test run while keeping other consumer protections in place.
• In September 2025, Gov. Josh Stein issued an executive order creating an AI Leadership Council to advise the governor and state agencies on AI strategy, policy, training, and deployment. The order also established an “AI Accelerator” within the North Carolina Department of Information Technology to be the state government’s “hub for AI governance, research, partnership, development, implementation, and training.” Finally, it instituted an AI Oversight Team for each state agency.
• Stein also announced that the State of North Carolina was using AI “to identify unnecessary or overly burdensome regulations and to provide user-friendly AI agents to help North Carolinians navigate state services.”
• Similarly, in 2025, Virginia Gov. Glenn Youngkin (R) issued an executive order directing each executive branch agency to use AI technology to examine their regulations and help policymakers identify and repeal contradictory, redundant, or unclear regulations.
• In May 2024, the Colorado legislature passed the first major state regulation of AI, but the law’s mandates were vague and created serious compliance challenges, prompting a special session of the legislature in August 2025 to deal with the problems. Ultimately, Colorado legislators changed the law’s effective date to June 30, 2026, to give them more time to fix it. Enforcement of AI laws in California and New York have also had to be delayed over compliance problems.
• In 2024, Utah established an AI advisory board within the state Department of Commerce. Called the Office of Artificial Intelligence Policy, the board exists to study AI and also to foster innovation while protecting consumers. Utah’s AI advisory board is also able to take advantage of the state’s open-ended regulatory sandbox in order to cultivate AI innovation through targeted regulatory relief.
• In 2024, to address the problem of AI “deepfake” images, the General Assembly passed a bill enhancing existing state law against knowingly disclosing — with the intent to “[c]oerce, harass, intimidate, demean, humiliate, or cause financial loss to” a person — an image exposing that person’s intimate parts or depicting that person engaged in sexual activity. Such an image now includes “a realistic visual depiction created, adapted, or modified by technological means, including algorithms or artificial intelligence.” The legislature similarly enhanced the law against sexual exploitation of a minor to include AI-generated images.
• In 2025, the General Assembly debated but did not pass legislation that would have outlawed deepfake images and audio of a person or political candidate and provided for collection of damages by the unlawfully depicted individual. Legislators also debated but did not pass a bill that would have banned AI deepfakes of political candidates in campaign and political messages and outlawed AI-generated child pornography

Recommendations

1. Expand North Carolina’s regulatory sandbox to include AI and other technologies.

The regulatory sandbox is designed for fostering innovation without smothering it with unnecessary regulation.

2. Resist the rush to regulate

Regulation for regulation’s sake can stifle improvements for no good reason.

3. Study ways to use AI in state government to reduce regulation and improve constituent services.

Gov. Stein’s direction to use AI “to identify unnecessary or overly burdensome regulations and to provide user-friendly AI agents to help North Carolinians navigate state services” is a laudable idea, but it can last only as long as his governorship. The General Assembly can study how to enhance Stein’s idea, use it to streamline state government in many more ways, and make it a permanent feature going forward.

4. Correct regulatory imbalances not by piling burdens on emerging markets and innovations, but by lessening burdens on existing ones.

Established providers have a point when they object to new competitors figuring ways around regulations that have hindered them. The answer is to remove the roadblocks, not install new ones.

How Does the Regulatory Sandbox Work?