Car-sharing startup RelayRides halts NYC service after cease and desist

Sometimes regulation puts the brakes on innovation, and car-focused startups have learned this more than most. Now car-sharing startup RelayRides has suspended its service in New York City after the New York state’s Department of Financial Services served it with a cease-and-desist letter.

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RelayRides is a peer-to-peer car-sharing marketplace in which people offer their cars for daily or weekly rentals, and it recently acquired competitor Wheelz. But the Department of Financial Services says RelayRides has been operating in violation of New York insurance laws and is “putting the public at risk” with inadequate insurance coverage.

So RelayRides has shut down in New York until further notice. The company writes in a blog post:

We are actively working with the Department to address these concerns. While we’re cooperating with the Department on these changes, we will be suspending activities that it considers non-compliant.

Effective Thursday, May 16, and until further notice, renters will no longer be able to make reservations for New York vehicles. Likewise, owner vehicles listed in New York will no longer be available. Trips already in progress in NY will not be affected by this change.

New York City has become a battleground for taxi, car-sharing, and ride-sharing applications. Just a few weeks ago, the CEOs of ride-sharing service SideCar and taxi-hailing app Hailo slugged it out onstage about New York’s rigid regulations.

Broken down car warning sign via SteveWoods/Shutterstock