Regulatory Risks in the Ride-Hailing Industry: Uber's Governance and Liability Exposure

The ride-hailing industry, once hailed as a disruptor of traditional transportation, now faces a reckoning with regulatory scrutiny. At the center of this storm is Uber Technologies, whose corporate governance and liability exposure have become a case study in the risks of prioritizing growth over accountability. The New Jersey attorney general's investigation into Uber's handling of sexual assault incidents-prompted by a 2025 New York Times report revealing a report of sexual misconduct every eight minutes between 2017 and 2022-exposes systemic failures in safety protocols and corporate transparency. This inquiry, alongside a multidistrict litigation (MDL No. 3084) involving over 2,500 plaintiffs, underscores the escalating legal and financial risks for Uber and its peers.

A Governance Crisis: Misaligned Incentives and Liability Amplification

Uber's corporate structure, led by CEO Dara Khosrowshahi and COO Andrew Macdonald, has long been criticized for prioritizing scalability over safety. Internal documents obtained through litigation reveal that the company developed tools such as mandatory video recording and gender-matching algorithms to mitigate sexual assault risks but delayed their implementation, a point reflected on Uber's governance page. Gus Fuldner, Senior Vice President of Safety & Core Services, has overseen a patchwork of reactive measures, including in-app emergency buttons and RideCheck features, which critics argue arrived too late to prevent harm.

The New Jersey investigation focuses on whether Uber's public safety messaging-such as its "Stay Safe Tonight" campaign-constituted consumer fraud. According to a TruLaw report, Uber received 400,181 sexual misconduct reports between 2017 and 2022 but publicly disclosed only 12,522 incidents. This discrepancy suggests a deliberate underreporting that could expose the company to class-action lawsuits and regulatory penalties. The case also raises questions about Uber's classification of drivers as independent contractors, a model that has shielded the company from liability in past litigation but now faces challenges as courts increasingly scrutinize gig economy labor practices, as discussed in a Global Law Today analysis.

Legal Precedents and Financial Exposure

The legal landscape for ride-hailing platforms is shifting rapidly. In California, the Supreme Court's 2024 ruling upholding the independent contractor model for drivers has been tempered by state-specific settlements, such as Massachusetts' $175 million agreement with Uber and Lyft, a development examined in a Commonwealth Beacon opinion. However, these settlements do not resolve broader questions about corporate liability for passenger safety. The MDL No. 3084 litigation, which survived a July 2025 motion to dismiss, now hinges on whether Uber qualifies as a "common carrier" under California law, a point outlined by the Lawsuit Information Center.

Financially, Uber's exposure is staggering. A 2025 analysis in the International Journal of Research estimates that a $1 billion settlement in MDL No. 3084 would reduce the company's net income by 15% and erode shareholder value. Compounding these risks are regulatory changes in British Columbia, reported by CBC News, which mandate gig workers be paid a minimum of $20.88 per hour during engaged time, potentially increasing Uber's operating costs by 50% in the region. Meanwhile, the Federal Trade Commission's recent lawsuit against Uber for deceptive subscription practices-specifically, its Uber One service-signals a broader regulatory focus on corporate transparency, as covered by Global Law Today.

Comparative Risks: Uber vs. Lyft

While Uber's liabilities are acute, its primary competitor, Lyft, faces similar challenges. Both companies have invested in autonomous vehicle (AV) partnerships to reduce reliance on human drivers, but their strategies diverge. Uber's collaboration with Waymo and Nuro emphasizes flexibility, while Lyft's acquisition of FreeNow and partnership with Baidu's Apollo Go reflect a more geographically focused approach, a distinction highlighted in an earnings call analysis. However, Lyft's recent profitability and aggressive electric vehicle (EV) targets-100% EV fleet by 2030-suggest a more agile response to regulatory pressures, according to Smart Cities Dive.

The Massachusetts settlement, which required Uber and Lyft to provide minimum wage guarantees without reclassifying drivers as employees, highlights the industry's struggle to balance compliance with operational costs, a point made by Lord, Kobrin, Alvarez & Fattell. For Uber, the financial burden of these settlements, combined with its $9.98 billion debt load as of December 2024, raises concerns about its ability to sustain long-term liability costs, a risk noted in a Monexa analysis.

Conclusion: A Tipping Point for the Gig Economy

The New Jersey investigation and MDL No. 3084 represent a pivotal moment for Uber and the ride-hailing sector. Investors must weigh the company's governance shortcomings against its strategic pivots, such as AV integration and safety feature rollouts. However, as courts increasingly hold platforms accountable for systemic risks, the era of regulatory leniency may be ending. For Uber, the path forward hinges on whether it can reconcile its growth-at-all-costs ethos with the demands of a legal system that now views corporate negligence as a public safety issue.