Regulatory sandbox in Israel: what exists in law, what is still a proposal, and how a startup can use it

What a regulatory sandbox is, and what it is not

A regulatory sandbox is a framework in which a regulator has the power to give a company relief from, or adjustments to, legal requirements for a limited time. The purpose is to test a new technology or business model under the regulator’s guidance and supervision. It is not an ordinary pilot: participation is usually individual, and a company that wants to join submits an application and receives the regulator’s approval.

The key point for a startup: to exempt you from a provision of law, the regulator needs express power in the law to grant an exemption for a trial. This is how the Ministry of Justice’s legal guide of December 2024, which is intended for regulators, explains it. Without such power, a “sandbox” can give guidance, information or funding, but not a permit to operate without a license.

Three things that are sometimes called a “sandbox” but do not give an exemption from the law:

• A regulator’s innovation center: informal guidance for understanding the legal framework, without an exemption.
• A government-funded pilot program: funding, data and support, without an exemption from the provisions of the law.
• Guides and policy documents: guidance for regulators on how to build a sandbox, not a track that a company can apply to.

What exists in Israel as of 1 November 2026

The details and sources for each row are in the sections below.

The table is not exhaustive. According to the Ministry of Justice guide, “Israeli legislation contains many provisions of law that allow regulatory experimentation” in certain fields. For example, the Electricity Authority has the power to approve a departure from the standards for a trial of a new technology. So check the law that applies to your field, even if it does not appear in the table.

Autonomous vehicles without a driver: a detailed sandbox set in law

A 2022 amendment to the Traffic Ordinance added an article whose purpose is to allow the operation of an autonomous vehicle without a driver, on the road, for a trial. The aim is to build knowledge about the vehicle’s safety and how it fits into traffic (section 16C). A vehicle may not be operated by an autonomous driving system without an operating permit (section 16E(a)). The permit requirement does not apply to operation without passengers, when a licensed driver sits in the driver’s seat or in a seat from which all driving actions can be performed, if the supervisor granted an exemption from the Traffic Regulations, and under the conditions the supervisor set (section 16E(c)).

Who can get a permit. The National Traffic Supervisor (המפקח הארצי על התעבורה) may grant a permit, including for carrying passengers for payment or without payment, if, among other things (section 16F):

• the applicant is a company incorporated in Israel whose center of business is in Israel;
• there is a control center in Israel and secure communication between it and the vehicle;
• an operating plan was submitted, and documented risk management was carried out;
• there is an insurance policy under the Motor Vehicle Insurance Ordinance [New Version], 5730-1970 (פקודת ביטוח רכב מנועי [נוסח חדש], התש״ל-1970), and a cyber protection plan.

The law sets a cap of 500 vehicles under all the permits together. The Minister may change it by order, in consultation with the Minister of Finance and with the approval of the Economic Affairs Committee (of the Knesset) (section 16F(d)).

How to apply. The application is submitted to the National Traffic Supervisor, who sets how to submit it, including digitally. In deciding, the supervisor considers the safety of road users and passengers and the effect on traffic (section 16G).

How long. A permit is granted for three years and can be renewed, provided that the total periods do not exceed nine years (section 16I). The permit can be canceled, suspended or restricted, for example if a condition is no longer met or if the vehicle was involved in a serious safety incident. As a rule, this happens only after the permit holder was given the right to be heard. In an urgent case, the permit can be suspended at once and the holder heard within 30 days (section 16K).

What the sandbox does not cancel. The permit holder keeps information and passes it to the supervisor and the police. It collects the information in a way that minimizes the invasion of privacy, without derogating from the Protection of Privacy Law, 5741-1981. It informs every passenger that the ride is a trial operation, and submits reports and a summary report (section 16L). The supervisor must publish the details of the valid permits on the Ministry of Transport website (section 16P).

Fintech and insurance: the sandbox bill was not enacted

Following a government decision of January 2018 and an inter-ministerial team report of January 2019, the “Bill to Encourage the Development of Technology in the Financial Sector in Israel” (הצעת חוק לעידוד פיתוח טכנולוגיה בתחום הפיננסי בישראל) was published in January 2021. The bill passed its first reading in the Knesset on 11 January 2021. In August 2021 the continuity rule was applied to it in the 24th Knesset, and it was referred to the Economic Affairs Committee. Under the bill:

• relief for innovative activity, whether or not it requires a license;
• the special arrangement for each participating company would apply for up to two years, and could be extended by two more years in certain circumstances;
• one statutory committee of the financial regulators, as a “single address” for companies;
• a duty to publish the decisions made about the participating companies.

The bill did not pass its second and third readings, and no proceedings on it were recorded in the 25th Knesset. The inter-ministerial team on artificial intelligence in the financial sector published its final report in December 2025. Its members include representatives of the Israel Securities Authority, the Ministry of Justice, the Bank of Israel, the Ministry of Finance, the Capital Market, Insurance and Savings Authority and the Israel Competition Authority. In the report, the team writes that there is a concern that the bill, if advanced, is not enough to promote activity in artificial intelligence. It recommends updating and expanding the bill. Alongside it, it recommends allowing each financial regulator to set up its own sandbox within its area of responsibility, by amending the financial laws where the existing law does not allow this.

What this means for a technology company in insurance, credit or payments: today there is no general track in law in which the financial regulators exempt you from the license requirement for a trial. According to the report, where the existing law does not allow this, an amendment to the legislation is needed. The Israel Securities Authority’s pilot program does not give an exemption either. Start with the question of which license is required, as explained in Fintech regulation: which license you need.

What the Israel Securities Authority and the Israel Innovation Authority do offer

The Israel Securities Authority innovation center. It was set up in 2018. It gives fintech companies that want to operate in Israel informal guidance: understanding the legal framework and checking whether it suits their activity. The Authority does not give financial assistance there, and the activity is not a substitute for legal advice.

The pilot program (“Data Sandbox”). A program of the Israel Securities Authority and the Israel Innovation Authority that started in 2020 and is described as active in the December 2025 report. It is for Israeli technology companies that run a pilot with their end customers:

• access to the Authority’s databases and to stock exchange trading data;
• funding of part of the pilot’s expenses;
• support from the Authority’s staff on regulatory questions;
• the Bank of Israel joined in 2022 as an observer, and supported companies in its areas of activity.

But according to the report, the Authority is not permitted to grant exemptions or relief from the provisions of the law within the program. Applications are made through a call for proposals of the Innovation Authority, via its online system, for a product that is already ready for a pilot. Check the Innovation Authority’s website to see whether a call for proposals is open.

Artificial intelligence: no general law, but sector sandboxes

• 2023 policy. The principles document of the Ministry of Innovation, Science and Technology and the Ministry of Justice proposes that AI regulation should develop gradually and use regulatory experimentation, including pilots and sandboxes.
• Government decisions of 1 August 2021 (general, not only for AI). Decision 212 provided that action should be taken to promote “a general regulatory framework that will allow regulatory trial environments”. Decision 218 adopted a report that recommended a framework law for sandboxes. No such law was enacted.
• Guides for regulators. The Ministry of Justice published a legal guide on designing sandboxes in December 2024, and the Regulatory Authority published a practical guide in January 2025. Both are intended for regulators. According to the Regulatory Authority, a sandbox is still not a common practice in Israel.
• The Israel Innovation Authority. In its draft AI strategy (April 2026), sandboxes are one of its existing tools. It recommends setting up AI sandboxes with the ministries in health, finance, transport, education and defense.
• A sandbox for AI in medicine. In July 2026 the Innovation Authority and the Ministry of Health announced the first three companies selected for the “Regulatory Sandbox” program for autonomous medical AI systems, funded by the Innovation Authority’s pilot fund. The announcement does not state a legal basis or an exemption from the provisions of the law.
• Education. According to the Innovation Authority’s draft strategy, the Ministry of Education set up an experimental regulatory sandbox for AI tools in the education system.

In other words, there is no general “AI sandbox” that you apply to. An AI company checks whether there is a sandbox or a call for proposals in its field, as in medicine. It also checks what exactly it gives: support and funding, or also an exemption from a specific provision of the law. Until then, it operates under the existing law, including the Protection of Privacy Law. See also AI regulation in Israel and Europe and Amendment No. 13 to the Protection of Privacy Law.

No sandbox for your activity: what you can do

• An exemption in the law itself. In payment services, the license requirement does not apply to someone who provides a payment service on a limited scale, as the Minister of Finance set in regulations, and under their conditions. Whoever operates this way must notify the Israel Securities Authority (section 3(a)(6) and (b) of the Regulation of Engagement in Payment Services and Payment Initiation Law, 5783-2023 (חוק הסדרת העיסוק בשירותי תשלום וייזום תשלום, התשפ״ג-2023)).
• A tiered license. In granting credit and in a service in a financial asset, an extended license is required only above an “extensive scope of activity” (sections 11A and 12(b) of the Supervision of Financial Services (Regulated Financial Services) Law, 5776-2016 (חוק הפיקוח על שירותים פיננסיים (שירותים פיננסיים מוסדרים), התשע״ו-2016)).
• A preliminary approach or an interpretive position. According to the December 2025 report, such tools already exist within the powers of the financial regulators.
• The Israel Securities Authority innovation center, for informal guidance before you apply for a license.

How to prepare an application for a sandbox

When such a track opens, the Ministry of Justice guide recommends that regulators ask for these details in the application:

1. a description of the trial and the technology, and the expected benefit;
2. the scope and duration of the trial;
3. the safety measures;
4. the provisions of the law or the regulations from which an exemption is requested, and why the exemption is necessary;
5. the duration of the requested exemption, and the alternative arrangements you will maintain instead.

Expect conditions too: a time limit, a limit on area and on the number of participants, guarantees or insurance to compensate anyone who could be harmed, and reports. Sometimes there is also a duty to inform the trial participants and to obtain their consent. The guide also recommends publishing decisions on granting exemptions to the public, and planning the exit from the trial in advance.

Frequently asked questions

Is there a regulatory sandbox for fintech in Israel?

Not as a law. The 2021 bill to encourage the development of technology in the financial sector passed its first reading and was not enacted. In December 2025 a government team recommended updating it and allowing each financial regulator its own sandbox. What official sources document: the Israel Securities Authority innovation center and a pilot program with the Israel Innovation Authority. Neither gives an exemption from the law.

Does the Israel Securities Authority’s Data Sandbox exempt you from a license?

No. It is a pilot program of the Israel Securities Authority and the Israel Innovation Authority that gives partial funding, access to data and support. According to the government report of December 2025, the Authority is not permitted to grant exemptions or relief from the provisions of the law within it.

Does a sandbox let you operate without a license?

Only if a law empowers the regulator to grant an exemption for a trial, and only under the conditions it sets: time, scope, number of participants, compensation and reporting. This is the case, for example, for autonomous vehicles, where the Ordinance itself provides for a trial operating permit.

How long does a trial permit for an autonomous vehicle without a driver last?

Three years, or less if the applicant asked for less or the supervisor decided so. It can be renewed, provided that the total periods do not exceed nine years.

Is there a regulatory sandbox for artificial intelligence (AI) in Israel?

There is no general law. There are sector tracks. In July 2026 the Innovation Authority and the Ministry of Health selected the first three companies for a sandbox for AI in medicine. According to the Innovation Authority, the Ministry of Education set up an experimental sandbox for AI tools in education. The announcements do not state an exemption from the law, so check what each track gives.

We have no sandbox. How do you start on a small scale?

Check for an exemption in the law itself, such as payment services on a limited scale with notice to the Israel Securities Authority, or a license that is not extended for credit and financial assets. Also consider a preliminary approach to the regulator.