An informative answer from Quora.

The PEER-TO-PEER TAXI SERVICES (as opposed to genuine ridesharing services) are, as of this moment, illegal. When drivers start using their privately insured vehicles for commercial purposes, this insurance becomes invalidated and so neither the driver nor the passenger are covered.Lyft and Sidecar try to get around this by describing passenger payments for these commercially offered rides as ‘donations’ – even though drivers of these services are most often working at least half-time.

The other potential for illegality is the mistake many drivers make by not considering their Lyft/Sidecar incomes to be taxable. They absolutely are. Only when the costs are ridesharing costs ($0.565/mile or less) can they be viewed as non-commercial. We’ve heard that Lyft will issue drivers with 1099’s, which is the appropriate thing to do, so they can report this commercial income on their taxes. Rob Power