Summary:

Uber and Lyft made progress this week toward establishing the legality of next-generation taxis and ridesharing in California, overcoming some earlier hurdles with government regulation and potentially opening the door for other companies to enter the market.

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Uber and Lyft have come to agreements with the California Public Utilities Commission (CPUC) this week, establishing ride-sharing companies in the state in another development on the bumpy road toward government acceptance. In October, the CPUC issued a cease-and-desist orders against rideshare companies like Lyft and Sidecar, which it said did not have the right permits to carry customers, but now it looks like those companies can continue in California.

While Uber is not currently offering peer-to-peer ride-sharing, the CPUC agreement allows for “drivers not specifically licensed to drive a limousine or taxi” to provide rides, which could include Uber’s drivers, the company notes. And Uber wrote that it could pave the way for ride-sharing in the future.

Update: As TechCrunch first reported and Uber later confirmed with us, the company plans to expand into ridesharing, although it has no immediate specifics to announce. “It would be natural to expect us to go into competition,” an Uber spokesman said.

Lyft’s parent company Zimride announced Wednesday that it had entered into an agreement with the state where the CPUC would drop its earlier cease-and-desist order and fine against the company. Lyft wrote in a blog post that the company has worked to improve safety measures, increasing liability insurance and performing background checks on drivers, and is pleased the state will let them continue operating for the time being:

“This agreement supports the continued legal operation of Lyft and sets a precedent for the upcoming rulemaking process. This agreement would not have been possible without the outpouring of support from the community,” wrote the company co-founders.

Uber announced Thursday that they also have reached an agreement with the CPUC over the company’s technology used to hail rides and has confirmed that its legal in California:

“This settlement agreement is part of a steady drumbeat of progress in which pro-consumer, pro-innovation jurisdictions like Washington D.C., New York City, and Massachusetts are recognizing that everyone wins when new technology that fosters efficiency, affordability, and choice in transportation is allowed to flourish. California has always been on the cutting edge. The CPUC agreement further demonstrates how the Golden State welcomes and supports not only technological advancement, but a better future for drivers, riders, and our cities.”

Rideshare and next-generation taxi companies like Uber and Lyft have struggled to gain acceptance in cities across the country even as users embrace their services, with Uber facing regulatory challenges in D.C., push-back from cab drivers in San Francisco and Chicago, and earlier problems in the more stringent New York City market. With Lyft and Sidecar, questions revolved around how the companies would properly insure drivers and riders.

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