Sidecar, a Bay Area "ride sharing" service that connects people who'd like to go somewhere with people who'd like to get some gas money from passengers, has raised $10 million in VC funding despite getting hit with a cease-and-desist order. At the moment the legal dispute is (inevitable) over whether Sidecar is illegal because it "did not have the proper permits and authority to operate a car service" or whether "because the company merely provides the communication tools to connect drivers and riders, it is legal."
As with Uber and its various legal issues, the real question is whether it should be illegal.
For a long time now, basically every jurisdiction in the United States has had a policy of promoting car ownership via subjecting personal vehicles to a much lower regulatory standard than alternative means of getting around. You can buy a van if you want to. And getting a license to drive a van is pretty easy. But getting a permit to drive a van around town giving rides to people in exchange for money is extremely difficult, if not impossible. Then alongside this thicket of artificial scarcity of cabs and bans on fixed-route intracity bus and van operation, most American cities offer some desultory publicly owned mass transit operations. But the overall idea is pretty clear—everyone should own a car and drive it around almost all the time, while rich tourists or visiting businessmen grab the occasional cab from the airport.
Now we have some tech companies coming along trying to shake up that paradigm in part by deploying new technology, but also in part by exploiting what they see as loopholes in the regulatory framework. But the real issue here isn't the text of the regulations, it's their purpose and intention. Regulators who don't want to see new entrants into the transportation field can always change the rules. My view is that this is a terrible decades-long policy trend and we ought to open transportation services up to many more models and operators. And it'd be great if public enthusiasm for high-tech startups helped spark some of that move to reform.
But there's nothing particularly high-tech about the idea of offering rides in exchange for money, and nothing about an app per se changes the fact that American jurisdictions have deliberately erected huge barriers to entry around the "give people rides for money" industry.