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It's hard to say because Lyft wasn't forced to shut down, they're doing it preemptively, perhaps to push for a vote on their Prop.

I was under the impression they're doing it because it'll be illegal for drivers to operate as contractors come tomorrow.

Nothing.

The taxi market shifts back to companies that are willing to pay for benefits.

Huh, I've never heard of one. Nearly all of taxi drivers are contractors, often owning the (company-branded) car they drive.