Things aren't going in Airbnb's favor in New York.
On Friday, New York Gov. Andrew Cuomo signed into law a controversial bill that makes it illegal to advertise short-term rentals that violate New York City's rules—and imposes steep fines to the violators. New York City's regulations prohibit rentals for less than 30 days without the host being present—also known as entire-home listings.
"In typical fashion, Albany back-room dealing rewarded a special interest—the price-gouging hotel industry—and ignored the voices of tens of thousands of New Yorkers," said Josh Meltzer, Airbnb's head of New York public policy, in a statement. "A majority of New Yorkers have embraced home sharing, and we will continue to fight for a smart policy solution that works for the the people, not the powerful."
Airbnb confirmed it will file a lawsuit on Friday afternoon, a move it threatened to make earlier this fall.
The company's argument is that because the bill's language doesn't distinguish between the host and the service on which they are listing, it violates the Section 230 of the Communications Decency Act, which prohibits legislators from sanctioning websites for content posted by its users. It also argues that it violates the First Amendment's freedom of speech and the 14th Amendment's Due Process clauses as it would trigger penalties against hosts and listing services without the parties knowing that a listing was not compliant with short-term rental laws.
Airbnb took a similar approach this summer when it filed a federal lawsuit against its hometown of San Francisco after the city's Board of Supervisors approved new rules that would impose steep fines on services like Airbnb if they display rentals that don’t follow local short-term regulations.
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Airbnb says that the majority of listings in New York City are legal per short-term regulations, and doesn't plan for this to significantly impact its hosts and guests in New York.
Earlier this week, the company published a set of policies it proposed to state officials it believes would both help with the state's concerns with home-sharing and allow Airbnb to continue operating. A source close to the company told Fortune that Airbnb has been discussing these policies with state officials for the last couple of months, but to no avail.
Proponents of the bill seem to disagree with Airbnb's premise that the new rules step over the legal line. "The bill says: You can’t advertise an illegal activity,'” Assemblywoman Deborah Glick, a Manhattan Democrat who supported the bill, told the Wall Street Journal in June. “I don’t know what the big confusion is."