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IMO, the main problem is the success of Uber and AirBNB in flaunting the laws has led some entrepreneurs to believe that they can ignore the laws. They just don

by akg_67 11y ago

IMO, the main problem is the success of Uber and AirBNB in flaunting the laws has led some entrepreneurs to believe that they can ignore the laws. They just don't realize that ignoring and fighting laws at municipal and state level is much easier to manage than ignoring and fighting the federal laws.

tptacek 11y ago
I don't think it has anything to do with local vs. federal. The real factors are: * Civil vs. criminal: Airbnb and Uber are violating regulations with civil penalties attached to them. SHX violated statutes with criminal penalties, though it appears they were charged civilly as a "slap on the wrist". The "1099 vs. FTE" issue Uber is running up against not only doesn't have criminal penalties attached (so long as they don't deliberately try to keep payroll taxes for themselves), but is also extremely common: 1099s are routinely reclassified. * Ordinance/regulation vs. statute: The laws Airbnb and Uber are running afoul of are regulations set by regulatory bodies. The SEC is a regulatory body but it's also a prime mover in criminal enforcement actions, unlike, say, a taxicab commission. * Principal vs. facilitator: The regulations Airbnb challenges are challenged by Airbnb's users, who are letting out houses and apartments in violation of local hotel/short-term-renter regulations. The law as it stands does not directly recognize culpability for sites that facilitate unlawful rentals. The law directly contemplates third parties marketing and creating venues for unauthorized securities transactions.
- akg_67 11y ago
  Both Uber and Airbnb violated the laws set forth by the cities and states. The advantage for both startups was that the laws only extended to a city or state. So both still had 100s of other cities and dozens of other states, that were slow to react, to target and gain traction and turn this into "Principal vs facilitator" and "consumer-benefit" issues. When you are running afoul with a federal law, you are losing the whole country with very little recourse unless you have a war chest. BTW, SHX would have been fine if they stayed under the radar for a while until they had a war chest to hire lawyers to argue and work with SEC to come up with a suitable compromise. See the example of Lending Club and Prosper that were shutdown by SEC in 2008/2009. Both emerged from it because they already had traction and enough of war chest to hire securities lawyers to work with SEC. Now Lending Club is a $5+ billion public company.
- waterlesscloud 11y ago
  Off-topic, but I've lost count of how many times I've heard of owners of small businesses keeping payroll taxes, getting caught, and cutting a deal with the IRS to stay out of prison that means they have to sell the business RIGHT NOW for whatever cash they can get. I've known a number of people who bought very profitable businesses from people in that exact situation.

by akg_67 11y ago

tptacek 11y ago

I don't think it has anything to do with local vs. federal. The real factors are: * Civil vs. criminal: Airbnb and Uber are violating regulations with civil penalties attached to them. SHX violated statutes with criminal penalties, though it appears they were charged civilly as a "slap on the wrist". The "1099 vs. FTE" issue Uber is running up against not only doesn't have criminal penalties attached (so long as they don't deliberately try to keep payroll taxes for themselves), but is also extremely common: 1099s are routinely reclassified. * Ordinance/regulation vs. statute: The laws Airbnb and Uber are running afoul of are regulations set by regulatory bodies. The SEC is a regulatory body but it's also a prime mover in criminal enforcement actions, unlike, say, a taxicab commission. * Principal vs. facilitator: The regulations Airbnb challenges are challenged by Airbnb's users, who are letting out houses and apartments in violation of local hotel/short-term-renter regulations. The law as it stands does not directly recognize culpability for sites that facilitate unlawful rentals. The law directly contemplates third parties marketing and creating venues for unauthorized securities transactions.

akg_67 11y ago
Both Uber and Airbnb violated the laws set forth by the cities and states. The advantage for both startups was that the laws only extended to a city or state. So both still had 100s of other cities and dozens of other states, that were slow to react, to target and gain traction and turn this into "Principal vs facilitator" and "consumer-benefit" issues. When you are running afoul with a federal law, you are losing the whole country with very little recourse unless you have a war chest. BTW, SHX would have been fine if they stayed under the radar for a while until they had a war chest to hire lawyers to argue and work with SEC to come up with a suitable compromise. See the example of Lending Club and Prosper that were shutdown by SEC in 2008/2009. Both emerged from it because they already had traction and enough of war chest to hire securities lawyers to work with SEC. Now Lending Club is a $5+ billion public company.
waterlesscloud 11y ago
Off-topic, but I've lost count of how many times I've heard of owners of small businesses keeping payroll taxes, getting caught, and cutting a deal with the IRS to stay out of prison that means they have to sell the business RIGHT NOW for whatever cash they can get. I've known a number of people who bought very profitable businesses from people in that exact situation.