The sharing economy is a challenge for local communities. On the good, it creates economic opportunity and reduces the price. On the bad, it circumvents public safety and welfare protection.

Such is the clash between Airbnb and local jurisdictions. San Francisco implemented a local ordinance that permits short-term rentals on the condition that the rental property is registered. In order to register the property, the resident must provide proof of liability insurance and compliance with local code, usage reporting, tax payments, and a few other things. San Francisco then enacted another ordinance that makes it a misdemeanor crime to collect a booking fee for unregistered properties.

Airbnb and Homeaway sued arguing that plaintiffs’ businesses are protected by 47 U.S.C. § 230(c) of the Communications Decency Act (and some other arguments ignored here). EFF, CDT, The Internet Association and some other usual suspects intervened—this case is attracting lots of attention. AIRBNB, INC. v. City and County of San Francisco, Dist. Court, ND California 2016.

Before delving into the application of the law to this case, let’s review a few key facts. Airbnb is a website where property owners can list available rentals, and guests can arrange for accommodations. Airbnb does not own the properties in question. Airbnb makes its money by charging a service fee to the property owner and the guest.

Sec. 230(c) protects interactive computer services from liability for third party content. Specifically, “[n–o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”

Plaintiffs sued, arguing that the San Francisco regulation is preempted by Sec. 230(c).

Plaintiffs lost, and it’s surprising because the plaintiff is here being held accountable for the actions of a third party. But listen to the rationale of the court, which reflects careful crafting by San Francisco.

First, plaintiffs are not being held liable for a third party’s speech. If a property owner publishes an advertisement for a property, that is perfectly fine. The property owner can do sue, and plaintiffs have no liability. Plaintiffs are not being called on to “monitor, edit, withdraw, or block” any listings. Hosting of those rental announcements, in and of itself, is not actionable.

It’s the next step that plaintiffs cannot do. Having received the content and hosted it, plaintiffs themselves cannot take the action of collecting a booking fee for an unregistered property. That is something the plaintiffs are doing, not the third party. The regulation is placing an obligation on the plaintiffs to confirm that the properties are registered. The compliance of plaintiffs is what is actionable, not the content of the property owners’ listings.

Plaintiffs and intervenors scramble and cite to the long litany of caselaw that establish that Sec. 230(c) provides broad immunity. Sec. 230(c) is the favorite go-to statute for establishing that online services cannot be held liable for what other people say. The problem, according to the Court, is that in each of those cited cases, the website is being held liable for its role as a publisher of third party content. There is something illegal, offensive, or problematic with the content, and the solution of the government, or the plaintiff who believed that he or she was being defamed, was to make the website liable for the third-party content. But that is exactly the type of liability Sec. 230(c) was enacted to prevent. Online services are interactive manifestations of the engagements of multiple sources, including the host and third-parties. Sec. 230(c) establishes that interactive computer services are not liable for third-party content.

In this case, an obligation is placed on plaintiffs to confirm that rental properties are registered, and only collect booking fees from those properties that are registered. Plaintiffs can host any third party content they want.