We have a medallion system and those medallions cost a lot of money. The taxi lobby keeps the number of medallions issued low to protect their investment. In addition, there are a number of stupid regulations and artificial boundaries that make the situation worse for everyone.

Unfortunately the government has created a situation where they've made owning a taxi medallion a huge investment and simply allowing Uber would destroy that investment overnight. The taxi industry, knowing now that they're at the mercy of the government, have started "donating" much more aggressively. At this point, the government is just trying to avoid dealing with the issue for as long as possible.