A federal judge has handed Airbnb a rebuke in its long-standing dispute with its hometown.Airbnb and co-plaintiff HomeAway failed to prove that San Francisco’s latest attempt to crack down on vacation rentals in private homes violate their rights, U.S. District Judge James Donato said in an 18-page decision issued Tuesday. However, because San Francisco lacks a “functional verification system” to enforce the law, the judge said the ordinance should remain suspended for now. San Francisco and the companies should try to work out a joint proposal for how to enforce the law before a hearing set for Nov. 17, he said.

After that hearing, the judge will rule on Airbnb’s request for a temporary injunction to block San Francisco’s law. But since Donato refuted most of Airbnb’s arguments in Tuesday’s ruling, he’s signaled that he is likely to reject Airbnb’s request — meaning that San Francisco could begin enforcing the new law, putting Airbnb on the hook for steep fines and penalties.

The ordinance in question calls for marketplaces for short-term rentals to be subject to fines of up to $1,000 a day per listing and criminal penalties if they arrange bookings of properties that flout the city’s registration system. Only about 1,700 hosts out of an estimated 8,000 to 10,000 have registered, although the requirement to do so took effect in February 2015. San Francisco wants to curb vacation rentals because it fears that they divert housing from permanent residents.

SAN FRANCISCO (AP) — San Francisco wants people who rent out their homes through Airbnb and other online platforms to follow some rules, and it wants the platforms to advertise only those rule-abiding listings — or face steep fines. That means Airbnb and others must stick to advertising San Francisco hosts who have registered with the city and haven’t exceeded the number of nights they’re allowed to rent. The penalty? Platforms can be fined up to $1,000 a day per violation. Now, Airbnb is suing its hometown, arguing that it’s not responsible for making sure hosts follow city rules and that San Francisco, the place that birthed some of the world’s most innovative startups, is undermining a bedrock principle that allowed those companies to flourish in the first place. Media: WochIt Media

Airbnb sued San Francisco in June over the city’s revision to its vacation rental law that shifted more of the onus to online marketplaces, saying the change violated its rights under the First Amendment and the 1996 Communications Decency Act. Expedia’s HomeAway later joined forces with Airbnb in seeking a preliminary injunction to block the new provision. San Francisco had agreed to suspend enforcement until Donato ruled.

Donato rejected the companies’ arguments point by point.

“The ordinance does not threaten the liability plaintiffs fear,” Donato wrote. “It in no way treats plaintiffs as the publishers or speakers of the rental listings provided by hosts. It does not regulate what can or cannot be said or posted in the listings. … Plaintiffs are perfectly free to publish any listings they get from a host and to collect fees for doing so — whether the unit is lawfully registered or not.”

The companies failed to submit evidence showing that the ordinance would force them to monitor, remove or alter hosts’ content, the ruling said, noting that while they could voluntarily screen listings, the ordinance doesn’t compel them to do so.

“While we appreciate that the judge has acknowledged our concerns about the inadequacy of the screening obligations in the new law … we respectfully disagree with the remainder of his ruling,” said Airbnb spokesman Christopher Nulty in a statement. “No matter what happens in this case, we want to work with the city to fix the broken system long before the legal process runs its course.”

CIty Attorney Dennis Herrera applauded the ruling.

“I am grateful for Judge Donato’s thoughtful ruling recognizing that just because Airbnb and Homeaway conduct their business online, they are not exempt from any regulation of their commercial transactions,” he said in a statement. “Online businesses don’t get a free pass from the types of regulations that apply to other businesses in San Francisco.”

Supervisor David Campos, lead sponsor of the amendments in question, saw the ruling as “a great victory.”

“This gives us a great deal of momentum and shows we’ve always been correct about our right to regulate this industry,” he said. “It goes beyond San Francisco to make it clear that jurisdictions have the power and authority to regulate companies like Airbnb and Homeaway to protect housing,” he said.

Donato appeared skeptical of the companies’ arguments at a hearing in October. At that hearing, Airbnb said the new provision would force it to jettison thousands of San Francisco listings, including ones that were law-abiding. Donato said technology could be the solution, and questioned attorneys for San Francisco about ways the city could automate checks of property registration numbers.

If the final ruling goes against Airbnb, as seems likely, legal experts say the company is bound to appeal — and Airbnb implied as much with a statement after the October hearing saying cases like this “can drag on for years.”

Eric Goldman, co-director of Santa Clara University’s High Tech Law Institute, said the ruling creates a dangerous precedent, allowing regulators to impose liability on online markets based on their getting a cut of transactions. “This should be disconcerting to major marketplaces like eBay and Amazon, who historically have been immune from liability for user transactions,” he said. “Based on the judge’s logic, these online marketplaces now apparently could be similarly forced to change their business model or face suffocating liability for transactions they can’t control.”

San Francisco, Airbnb’s hometown, was one of the first cities in the world to legalize and regulate vacation rentals in private homes, with a law passed in fall 2014 that Airbnb championed and helped write. However, as many hosts ignored the law’s most basic provision — that they register — Airbnb started to say that the registration system was broken and needed streamlining.

Since then, as Airbnb has grown to almost 3 million listings worldwide, cities from Barcelona to Berlin, and from New York to Los Angeles have tried to rein in short-term rentals, often with host registration systems, and Airbnb has become increasingly aggressive in battling regulations.

New York state last month passed a law that would fine hosts $7,500 for posting short-term rentals on sites like Airbnb when they conflict with local housing regulations. Airbnb promptly filed a federal lawsuit saying the law would cause it “irreparable harm.” The law has been suspended pending the lawsuit’s outcome. Airbnb and New York are reportedly in discussions about possible resolutions outside of court.

Airbnb also sued Anaheim in July over a new law making websites liable for simply posting listings that lack a city permit. Anaheim subsequently withdrew that provision, and Airbnb dropped its lawsuit.

In court filings, the city said Airbnb makes it difficult to discern whether properties are legally registered. Airbnb puts registration numbers in a section called “other things to note.” If a host does not enter them in a specific format, Airbnb’s software treats them as phone numbers — which the site does not allow to be posted — and replaces them with Xs.

The new law would allow the city to subpoena records from hosting platforms, and would require companies like Airbnb, HomeAway and FlipKey to submit monthly affidavits confirming that all guest stays in San Francisco were in “lawfully registered” properties.

Carolyn Said is a San Francisco Chronicle staff writer. Email: [email protected] Twitter: @csaid