Inside the sharing economy: Airbnb fight heats up in NYC

One sign of a disruptive company is when the start-up clashes with the regulatory establishment.

The debate surrounding the legality of Airbnb—the home-sharing start-up that has turned into a global phenomenon—reached New York's City Hall this week. At a city council oversight hearing Tuesday, groups on both sides argued whether the short-term rental business is good for the region.

Airbnb and advocates argue the rental service has brought in millions in economic activity. "Most of our guests are international—they're coming and spending money here," said New York City Airbnb host Lee Thomas.

The debate surrounding the legality of Airbnb recently reached New York city hall. Some object to the ripple effect on local rents and housing availability.

Kate Rogers | CNBC

But opponents including state Attorney General Eric Schneiderman say many Airbnb rentals in the city are breaking accommodation laws. Local rules require a minimum of 30 days for short-term rentals, and that Airbnb hosts are using primary residences and are present while renting out space.

Mayor Bill de Blasio's Office of Special Enforcement says it will continue to crack down on illegal hotels.

"We have a strong enforcement apparatus to pursue complaints of illegal hotel activity. When we have a bad actor putting people's safety at risk, we're going to go after them," a mayoral spokesman, Wiley Norvell, said in an email to CNBC.

—CNBC's Betsy Cline contributed to this report.