By limiting the number of medallions, the City established a monopoly, created scarcity and then let investors drive up prices. At one point, a taxi medallion was worth more than a seat on the stock exchange.
In return, yellow cabs dominated just the parts of the City that were most profitable and abandoned the rest.
When Uber and Lyft upended this, the City failed to make good on the monopoly it created and compensating for its loss, thereby leaving small cab owners suicidaly in debt.
Legally, the City has indemnity, but this issue will not go away.
Government still has the right to create false monopolies that technology will continue to disrupt. Very few politicians understand this other than creating new regulations that are generally too out of touch to matter.
It is also quite likely those regulations will be deeply influenced by special interests, leading to further public distrust.
Uber has shown that, by being truly useful to the public, even government with all its power and moneyed lobbyists can't stop them.
The real problem is not Uber but government itself and the outdated limitations of the two-party, management vs. labor debate and the backroom system supporting it.
Today's generation sees Blockchain, open ledger legislation, voting and Cryptocurrency as opening up government to the people.