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More Legal Hot Water for Airbnb

What a week: After making a tax concession, the startup earned a $10 billion valuation. Now its legal troubles are starting all over again.

It's been a roller coaster of a week for Airbnb. The startup closed a deal for $450 million in funding, attaining a valuation it'd reportedly been chasing: $10 billion. It's now, after this funding round led by private-equity firm TPG, one of the most valuable startups on the planet.

Before the bubbly had time to settle in San Francisco, bad news came from out east: New York State attorney general Eric Schneiderman Monday filed an affidavit with the state Supreme Court in Albany claiming that the majority of Airbnb listings in New York are illegal. Arguments are expected to begin tomorrow. 

Schneiderman is seeking user data from Airbnb in a subpoena that was originally filed in October. There's speculation that since Airbnb, a fast-growing company that lets people rent out their homes or rooms, has been in negotiations with the Attorney General's office about the matter that a settlement fell apart.

The issue at hand is that subletting for less than 30 days is in general illegal for renters in New York who are not continually residing in their apartment. And, for Airbnb, plenty of the nearly 20,000 offerings--64 percent on January 31--listed on Airbnb in New York were for an "entire apartment," not a shared space, as the law would seem to mandate. 

In an email to New York users, Airbnb's head of global public policy, David Hantman, came out swinging, writing: "Taking on an Attorney General who is determined to fight innovation and attack regular people isn't easy and we won't succeed without standing together." He also wrote: "the Attorney General made it clear that he will seek personal data on our users until the end of time."

Airbnb claims it will pump $768 million into New York’s economy this year. The company has been under much scrutiny for not abiding by the same hospitality tax structures traditional hotels are subject to.

The company announced last week that it would begin a pilot program in San Francisco, Portland, and New York, to start "self-tax collecting." The company estimates the tax could collect up to $20 million a year for the government. Critics say it's about time that a company worth $10 billion and reportedly working toward an initial public offering.

"Attorney General Schneiderman has worked in partnership with innovative tech companies like Facebook and Yelp to curb illegal activity on their sites," Schneiderman's press secretary told Valleywag. "It's disappointing that AirBnB has taken a different approach, with name calling and PR campaigns to confuse the issue and evade the law."

Last updated: Apr 21, 2014

CHRISTINE LAGORIO-CHAFKIN | Staff Writer | Senior Writer

Christine Lagorio-Chafkin is a writer, editor, and reporter whose work has appeared in The New York Times, The Washington Post, The San Francisco Chronicle, The Village Voice, and The Believer, among other publications. She is a senior writer at Inc.

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