Airbnb has taken the city of San Francisco to court over a law requiring that the home-rental service verify its hosts are registered with the city or else face steep fines, but if yesterday's interaction between a federal judge and lawyers representing Airbnb and Homeaway at a hearing in the case is any indication, the Chronicle reports that the $30 billion company may need to find a new legal approach.

The basis for Airbnb's challenge lies in the 1996 Communications Decency Act which was designed in the early days of the internet to protect online publishers. The argument goes like this: Airbnb is an online publisher of short-term rental listing and thus cannot be held liable if some of said listings fail to comply with local regulations. While the act is established law, Reuters reports that US District Judge James Donato appears unsure it's applicable here.

"I'm just struggling with understanding how this ordinance inherently requires me as a district court to treat your client as a publisher," Donato reportedly said. Specifically, the SF ordinance doesn't apply to all listings on Airbnb's site — just those actually processed by the company. That means your average Joe could list unregistered units all he wants at no risk to the company — but if a guest went ahead and actually booked such a listing, and then Airbnb processed it, at that point those fines of $1,000 per incident could be levied.

That system is no accident: In July the Board of Supervisors voted to amend the law in the hopes of preempting Airbnb's Communications Decency Act (CDA) argument — and the lawsuit altogether — changing the point at which fines are assessed from when a listing is published on the site to when a transaction is processed.T he CDA "does not say because you are a website you are free of any potential regulation or liability,” Donato continued. “I’m struggling with how this ordinance can be described as content-based.”

Airbnb, for its part, is nowhere near giving up the case. "We believe the City’s ordinance violates an important federal law that serves as the backbone of free speech and innovation online, and we are confident we will prevail," reads a company statement picked up by the Business Times.

Airbnb first sued the city over the new law in June of this year — the same month the Board of Supervisors voted to fine the company for unregistered hosts. Since that time, the Chron reports that roughly 1,700 hosts have registered with the city. In April of this year there were 9,500 listings for short-term rentals in San Francisco.

"Though these cases can drag on for years, we remain ready and willing to work with the city right now on much simpler rules that allow middle class residents to continue sharing their homes and protect the city’s scarce housing stock," Airbnb said in a statement.

Previously: City Revises 'Airbnb Law' Additions To Avoid Airbnb Suing Them