Artificial intelligence (AI) is a transformative technology that is reshaping economic and social systems. In response to the challenges it poses, the European Union has developed a comprehensive regulatory framework, including the AI Act, which aims to balance innovation, fundamental rights and economic competitiveness. Central to this framework is the EU digital ecosystem, which is based on a decentralised and territorial model. Unlike the centralised structures of US Big Tech, the European approach relies on SMEs, industrial clusters and entrepreneurial networks. However, regulatory fragmentation and high compliance costs risk stifling innovation. Against this backdrop, regulatory sandboxes are emerging as pivotal policy instruments to foster AI development. By providing controlled testing environments, they aim to reduce regulatory burdens, particularly for SMEs and start-ups, and to foster structured dialogue between regulators and innovators. Taking an interdisciplinary approach that combines legal and economic perspectives, this paper explores these dynamics, emphasising the importance of balancing market forces and societal values when shaping Europe’s digital future.