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After rallying hosts to fight a New York state law that fines them for posting technically illegal listings on Watch Sexy Assassins (2012)Airbnb, the company has abandoned the cause.

Airbnb settled a lawsuit against New York on Friday on the condition that fines for violating the state's apartment rental rules would only be leveled against hosts and not the company. The law was always written in a way that implied its fines of up to $7,500 would apply to hosts, but now Airbnb has that distinction in writing.

"We very much see this as a material step forward for our hosts, with Airbnb and the city agreeing to 'work cooperatively on ways to address New York City's permanent housing shortage, including through host compliance with Airbnb's One Host, One Home policy,'" Airbnb said in a statement. "We look forward to using this as a basis to finding an approach that protects responsible New Yorkers while cracking down on illegal hotels that remove permanent housing off the market or create unsafe spaces."

"Our hosts are our top priority, always," the company added. "The lawsuit was a way to fight a bad law that does not distinguish between responsible hosts and truly bad actors. By settling we are opening the door to cooperation with the City."

The company maintains that the lawsuit is only one way it was fighting New York's restrictive regulations.

The lawsuit challenged a bill passed this summer that made it illegal to advertise or post on Airbnb any listings for rentals of whole apartments in shared buildings for fewer than 30 days. Rentals in that category have technically been illegal since 2010, although they're exceedingly common on Airbnb.

The 2010 law was passed before Airbnb really gained a foothold in New York. But that hasn't stopped Airbnb's opponents from using it against the short-term rental company.

Airbnb claimed in its lawsuit that the law by governing advertising, or a form of speech violated the First Amendment and the Federal Communications Decency Act.

The company, valued at $30 billion, held New York events to get its hosts to lobby against the bill before it was signed into law. Even pro-Airbnb hosts at those events suspected that the company might not stand behind them to the end.

"Airbnb is doing this," one host said at a September gathering, "but they're not going to pay these fines for us." 

It's still unclear exactly how the law will be enforced. Although opponents of Airbnb are focused on New York City, the law applies to the entire state. Hosts can be fined $1,000 for a first violation of the law and $7,500 for a third.

It's not just the law itself that poses a problem for Airbnb. Anti-Airbnb legislation in a high profile city like New York could inspire other cities to follow suit. New York is already one of Airbnb's most lucrative markets in the world.

Despite settling the suit, Airbnb still doesn't like the law, New York spokesman Peter Schottenfels said. The company plans to work with the city to figure out how to use the law to crack down on more traditional illegal hotels. A public hearing will be held later this month on questions surrounding the law's enforcement.