It’s a good day for ridesharing startups.

The California Public Utilities Commission came out with a proposed decision for ridesharing startups today that allows them to remain in operation. The commission created a new category called “Transportation Network Company” or TNCs to refer to companies like Lyft, SideCar, InstantCab, and UberX that connect passengers with drivers using their personal vehicles via the Internet.

Now these companies must be licensed by the CPUC, require criminal background checks for each driver, establish a driver training program, implement a zero-tolerance policy on drugs and alcohol, and adopt a more stringent insurance policy than the CPUC requires for limousines.

“The Commission is aware that TNCs are a nascent industry,” the proposal said. “Innovation does not, however, alter the Commission’s obligation to protect public safety, especially where, as here, the core service being provided — passenger transportation on public roadways — has potential safety impacts for third parties and property.”

The proposal comes on the same day as cab drivers protested City Hall demanding stricter regulations for ridesharing startups. Cab companies and drivers said that these companies operate illegally and without proper safety insurance and precautions. Uber, Lyft, and Sidecar started to gain momentum last year, but outdated regulations created a lot of ambiguity surrounding their legality.

The CPUC issued cease and desist letters and issued $20,000 fines in November 2012. The community of drivers and passengers who used those services to get around quickly rallied and urged the authorities to stand down. The commission initiated a re-examination of its policies in December 2012 and a month later gave Lyft a green light to continue operating while it deliberated, suspending the fines and the letters.

This proposal is a significant victory for these startups. It means that they will be permitted to operate in San Francisco, as long as they abide by the new regulations, assuming the proposal is adopted that is. CPUC information officer Andrew Kotch told VentureBeat that the proposal will be up for public review for 30 days and will be placed on a commission meeting agenda, for five commissions to accept, reject, or propose alternate decisions.

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