Role of State Governments in the Sharing Economy

Abstract

The advent of the sharing economy inevitably raises issues over whether it should be regulated to protect consumers, safeguard the marketplace, or generate revenues. What level of governance should regulate it becomes the next question. The Chapter argues that in the United States the states should exercise regulatory oversight when statewide interests outweigh local concerns. State hegemony becomes particularly strong when uniform treatment across municipal boundary lines proves beneficial. States should also preempt local regulations when the latter causes adverse extraterritorial impacts, disrupts market efficiency, or harms other statewide interests. The Chapter applies this regulatory interests balancing test to two sharing economy activities, ride sharing and short-term rentals.

Recognizing the difficulty of shaping and enforcing sharing economy regulations, the Chapter proposes a methodology to be undertaken before their promulgation. The methodology counsels a state to examine each of the available regulatory tools and to ascertain the governmental body best suited to employ them. Given overlapping state and local regulatory interests, the Chapter argues that states should abandon a hierarchical approach in favor of coordinated state and local regulation. The Chapter advocates the formation of state and local partnerships and other forms of intrastate collaboration to regulate the sharing economy as needed.

Keywords: sharing economy, preemption, state, local, regulation, collaboration, intrastate, uniformity, extraterritorial, short-term rentals, ride sharing, state interest