Legal teams for Airbnb, the City of New York, and Attorney General Eric Schneiderman are in talks this week to possibly settle Airbnb's lawsuit against government regulators. The lawsuit challenges a new state regulation that subjects most Airbnb hosts to fines of up to $7,500 for advertising their entire apartments on the platform for less than a month.

While the practice of renting out individual apartments short-term has been illegal since 2010 under the city's Multiple Dwelling Law, that law has been sporadically enforced. A recent data dump from Airbnb revealed that over half of NYC Airbnb users—there are 39,553 listings city-wide as of October 1st, according to Inside Airbnb—advertise this way.

After Governor Andrew Cuomo signed the bill into law this month, Airbnb went on the offensive, arguing that working class hosts will bear the brunt of this latest regulation, and accusing the state of conceding to the wishes of hotel industry lobbyists. Lawmakers have countered that the goal of the legislation is to crack down on commercial operators who use Airbnb to convert multiple apartments into rotating short-stay rentals for tourists, and have accused Airbnb of scrambling to protect its bottom line.

District Judge Katherine Forrest signed an order Monday in Federal District Court stating that, "The parties [Airbnb, New York City, AG's office] are to provide the Court with a written status update by the end of the week." A source close to the negotiations told Gothamist Tuesday that the adjournment was granted "in order for the parties to reach some agreements here."

The order was issued in place of a hearing originally scheduled for Monday afternoon.

The Wall Street Journal first reported the talks. According to the paper, the two sides are discussing a settlement that would protect Airbnb from fines, even though individual hosts might still be subject to them.

Airbnb's lawsuit argues that the language of the regulation is ambiguous, and doesn't protect Airbnb from incurring fines—an outcome the suit says would be in violation of the federal Communications Decency Act, which protects websites from legal accountability for third-party content published on their sites.

"Given the ambiguity of the act, Airbnb anticipates the government will argue that the act applies to such online platforms, and will seek to enforce the act against Airbnb and other such hosting platforms," Airbnb argues in court papers. "Airbnb thus faces the real prospect of being the subject of an enforcement action under the act."

The lawsuit also argues that advertisements are protected speech under the First Amendment.

Assemblywoman Linda Rosenthal, the bill's co-sponsor, told WSJ on Monday that "the law fines the hosts and does not fine Airbnb."

City Hall confirmed last week that it will not enforce the new regulations until the judge decides on Airbnb's request for a preliminary injunction. Enforcement will fall to the Mayor's Office of Special Enforcement, which investigates illegal hotels according to the 2010 law. The laws authors have said that the OSE will not actively scour Airbnb's thousands of listings to look for possible illegal hotels.

Airbnb and the AG's office declined to comment on this week's negotiations. Mayoral Spokeswoman Melissa Grace responded by reiterating a statement issued earlier this week.

"We are taking the steps necessary to enable us to enforce the State law," she said. "Our focus has and will continue to be operators of illegal hotels who put people in unsafe conditions and take affordable homes off the market. We will continue to apply current State law to hold bad actors accountable."