The app-based, taxi-like services UberX and Lyft are in talks with the city of Ann Arbor - after the city sent the companies a "cease and desist" letter.
This is just the latest of many legal tangles across the country for the companies, which are operating in a new grey area of transportation-for-hire.
The companies say they are "rideshare services." State and local transportation officials call them "transportation network companies," but insist that many of the regulations applying to traditional taxis also apply to these new services.
Customers use a smartphone app to schedule their ride - instead of the traditional phone call or whistle-and-wave to hail a taxi. Drivers use their own cars.
The driver gets paid by the company weekly, and a portion of the fare goes to the company, similar to how taxis operate.
Traditional taxi companies say Uber and Lyft in many cities are using loopholes to bypass the taxes and licenses required for traditional taxi services.
A letter from Ann Arbor's city attorney says the companies appear to be not in compliance with the Michigan Limousine Transportation Act.
An MDOT spokesman says the Act requires drivers to have a certificate of authorization from the Michigan Department of Transportation and proof of commercial liability insurance.
He says drivers would also need to have a chauffeur's license from the Secretary of State, under the state Motor Vehicle Code.
Such requirements would increase the expenses for people hoping to make an extra buck - or a living - providing rides.
For example, a chauffeur's license costs $35, and drivers must pass a written test.
An annual certificate from MDOT costs $50 annually.
So far, police are not acting on the city's threat to fine Uber and Lyft drivers $500 as allowed by state law.
Editors note: An earlier version of this article mistakenly attributed the requirement for a chauffeur's license to the Michigan Limousine Transportation Act, instead of the Motor Vehicle Code.