it makes me question why exactly AirBnB was so up in arms about thisWell, one obvious problem is that losing a big subset of your business is always bad.
But another problem, which I just found, is that these fine points of the law, if they exist, are nowhere to be seen on the web. All the immediately obvious Google hits paraphrase the law as "AirBnB and Craigslist short-term rentals now illegal in NYC". So that's a first-order marketing problem.
It also adds fuel to the FUD fire, as we are seeing right here in the linked article. Suddenly every AirBnB host is being accused of running a flea-infested, credit-card-scamming, fire-hazard rat trap. That's a second-order marketing problem, but it could prove even worse than the first-order one: The law only applies in NYC, but FUD can spread everywhere.
Finally, there are the legal problems. This law gives the cops, and whoever tips off the cops, a lever with which to hassle AirBnB guests and hosts alike. Just because you're ultimately going to be found innocent doesn't mean that being hassled by the cops is a barrel of fun. If it happens to any extent it's bound to hurt the reputation of services like AirBnB, especially among foreign travelers, who are probably damn scared of American police as it is.
And, of course, to prevent a raft of lawsuits AirBnB must now carefully educate its NYC hosts about the law, and pay a lawyer to draft an airtight agreement for the hosts to sign to indicate that they understand the law, and defend any lawsuits that spring up when people get busted in NYC and blame AirBnB anyway despite all those precautions...