In the midst of Tuesday's chaos, a news item slipped through pertaining to Airbnb and San Francisco's latest attempt to crack down on scofflaw hosts. A federal judge ruled against a preliminary injunction sought by Airbnb to halt the implementation of an SF ordinance that penalizes them (and competitor Homeaway) for the illegal behavior of those who use their platform. As the Chronicle reports, the 18-page decision by U.S. District Judge James Donato isn't final, and another hearing is set for November 17, but it is looking likely that Airbnb is going to lose this pivotal battle.

You'll recall that Airbnb filed suit against the city back in June over what they see as an unfair burden on their platform — namely the supervisor-approved ordinance fining the company $1000 per day per illegal listing, which would include listings of units that are not a host's primary residence, entire units rented for more than the legal 90 days per year, and units that are not registered with the city's Office of Short-Term Rentals.

Airbnb argues that under the 1996 Communications Decency Act, "local governments [can not hold] websites responsible for content published by their users." And they've argued further that given the disorganization of the city's short-term rental office and the cumbersomeness of the registration process, they can't be expected to hold hosts responsible for adhering to the letter of the law either. Further, they argued in their filing, "The new law also violates the federal Stored Communications Act, which creates uniform privacy protections for internet users and prevents cities from simply demanding that platforms turn over user information without a subpoena or other legal process."

But Judge Donato wasn't having it, and in a hearing in early October said to the company, "I’m struggling with how this ordinance can be described as content-based," noting that Airbnb would only be fined if they processed a transaction with a scofflaw host, not when said host posted their listing.

Donato has instructed Airbnb and the city to try to come up with a joint proposal for how better to track legal and illegal postings, and to enforce the law, after which he will give his final ruling.

As Bloomberg now reports, the initial ruling, while local and seemingly narrow, could have far broader implications for the company, which is waging similar battles in other cities with tight housing markets.

Also, they note, "Had the world’s fourth-most valuable startup succeeded in its early attempt to block the ordinance enacted in June by its hometown, the strategy might have served as a template for other gig economy firms challenging regulations across the U.S."

Airbnb spokesperson Nick Papas issued a statement saying, "While we appreciate that the judge has acknowledged our concerns about the inadequacy of the screening obligations in the new law and has continued to postpone enforcement of these rules as a result, we respectfully disagree with the remainder of his ruling."

If the ruling is made final, Airbnb could be on the hook for quite a lot of money if they don't get hosts registered and abiding the law. As the Business Times points out, since the original "Airbnb Law" took effect in February 2015, only about 1,700 hosts out of about 8,000 to 10,000 SF rental listings have registered with the city.

Supervisor David Campos, who spearheaded the effort to tighten regulations on short-term rental platforms, issued a statement after the ruling saying, "Airbnb has had opportunity after opportunity to work with San Francisco's city hall to craft regulations that actually protect our neighborhoods while still allowing these companies to make billions. But instead they've employed an all-or-nothing strategy that has wasted San Francisco's time and money. It’s getting a little hard to swallow all of Airbnb's talk about 'sharing' and 'community' when they're suing every city that passes common sense regulations."

City Attorney Dennis Herrera also applauded the ruling, saying, "I am grateful for Judge Donato’s thoughtful ruling recognizing that just because Airbnb and Homeway conduct their business online, they are not exempt from any regulation of their commercial transactions."

Previously: Judge Grills Airbnb At Hearing Over SF Host Registration Law