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lyftsideStartups like UberX, Lyft and Sidecar cleared a monumental hurdle on Thursday after the California Public Utilities Commission voted unanimously to legalize ride-sharing, as California became the state to initiate such regulations.

The legality and legitimacy of ride-sharing is still undecided in Seattle, though, as city lawmakers continue to discuss how exactly to manage what has become a complicated and crowded space thanks to our smartphones.

Lyft and Sidecar allow riders to pay via “donation” with credit and debit cards linked to their smartphones, while UberX charges similar rates to taxis but does not require tips. These models typically save riders money over typical taxi services.

Taxi companies in Seattle and other cities are concerned that the three ride-sharing companies are cutting into their customer base with services that say require far less regulation and oversight. They’re letting the city hear about it — quite literally.

The problem the taxi companies have is that Lyft and the others are not regulated by the city the same way taxis are. Technically, since the ride-sharing companies operate without any licensing or inspection by the city, some argue that the ride-sharing startups are conducting business illegally.

sidecarBut the city has yet to make a decision as it allows these companies to scoot around town in the meantime. The Seattle City Council met earlier this month to discuss transportation study that analyzed the growing demand for ride-sharing, which is definitely increasing.

[Related: Lyft co-founder: Ride-sharing startups will make taxi companies more money]

uberxCity Council president Sally Clark, who’s heading up the committee on taxi, for-hire and limousine regulations, said that it’s possible the city would shut Lyft, Sidecar and UberX down until they really figure out what ground rules to set.

“I think it’s either shut them down completely until we have the new regulatory framework fully ready or put in place short-term rules addressing safety and consumer protection,” she told GeekWire. “We’ll see how the discussion goes.”

Clark said that she liked the model California adopted, one that requires ride-sharing startups to enforce company licensing, criminal background checks and a $1 million per-incident insurance coverage.

“I can say that based on the draft I read, they’ve adopted a compelling model,” she said. “For me, it addresses the insurance concerns, as well as concerns about driver background checks and vehicle safety.  However, the draft didn’t address the question of whether rideshare drivers should be licensed in some way. That’s an open question here.”

There is another meeting scheduled for next Thursday which will focus on both the possible elements of a permanent overall regulation reform package and what rules should be made in the interim as the city decides what to do.

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