The City Attorney of San Francisco has sent an immediate cease-and-desist letter to the makers of MonkeyParking, a smartphone app that allows drivers to auction off their parking spaces.

In the Monday letter, City Attorney Dennis Herrera cited a city code that forbids drivers who "enter into a lease, rental agreement, or contract of any kind" for public parking spots. The violation is punishable by up to $300 in fines.

The Rome-based makers of the app have until July 11, 2014 to comply, and they could then face a lawsuit brought by the city. In addition to the City by the Bay, the startup also operates in the Italian capital.

"Technology has given rise to many laudable innovations in how we live and work—and MonkeyParking is not one of them," Herrera said in a statement. "It's illegal, it puts drivers on the hook for $300 fines, and it creates a predatory private market for public parking spaces that San Franciscans will not tolerate. Worst of all, it encourages drivers to use their mobile devices unsafely—to engage in online bidding wars while driving. People are free to rent out their own private driveways and garage spaces should they choose to do so. But we will not abide businesses that hold hostage on-street public parking spots for their own private profit."

The city said that it will also be sending similar letters to two other parking-related smartphone app-based startups.

MonkeyParking told Ars that it strongly believed in the company’s business model.

“As a general principle we believe that a new company providing value to people should be regulated and not banned,” Paolo Dobrowolny, MonkeyParking’s CEO, wrote to Ars in a statement. “This applies also to companies like Airbnb, Uber, and Lyft that are continuously facing difficulties while delivering something that makes users happy. Regulation is fundamental in driving innovation, while banning is just stopping it.”