As a result of a 2017 law that blacklists Israel boycotters, Texas is making an example of the California-based short-term rental giant.

Texas has blacklisted an American company for, as the state sees it, opposing Israel. Using the power of its purse, Texas is sanctioning Airbnb for purportedly ceding to pressure from activists with the boycott, divest and sanction movement that targets Israel for its treatment of Palestinians.

The short-term rental giant announced in November that it would ban the listing of rentals in settlements, which most of the international community view as illegal, in Israel-occupied West Bank.

The move prompted fiery backlash from allies of Israel, including Texas Republicans, who claimed that the company was giving in to radical activists. Texas Senator Ted Cruz said at the time that Airbnb had “contributed to the rising tide of anti-Semitism that we’ve seen happening all over the world. They caved to pressure from the anti-Israel boycott movement, which promotes falsehoods in its campaigns against the world’s only Jewish state.”

On Friday, Texas Comptroller Glenn Hegar officially added the Silicon Valley darling to its blacklist of alleged foes of Israel, which is the state’s fourth-largest trading partner. The list includes three other companies — two based in Norway and one in the United Kingdom.

In 2017, Texas lawmakers overwhelmingly passed legislation that prohibited the state from contracting with companies or individuals that have or will “boycott Israel,” alluding to the boycott, divest and sanction (BDS) movement.

The Airbnb ban comes a few months after the anti-BDS law prompted free speech lawsuits against the state. A speech pathologist lost her job with the Pflugerville Independent School District when she refused to sign a contract affirming that she would not boycott Israel. She filed a lawsuit against the district and the state. Soon thereafter, the ACLU filed a lawsuit on behalf of four Texans who are arguing that the law violates their First Amendment rights.

Representative Phil King, a Weatherford Republican who authored the bill, has introduced new legislation that narrows the scope of the law, which currently stipulates that school districts, counties, cities and any other local entities may not enter into contracts or investments with companies that are on the state blacklist.

King has said the new bill, which he laid out in committee last week, is meant to clarify that the 2017 law is supposed to target companies that boycott Israel, not individuals. Rather than preventing a city employee from using government funds to stay in an Airbnb, for instance, the new version would apply only to institutional-level transactions greater than $100,000.

“We want to prevent major transactions with tax dollars if the outcome is to hurt Israel,” King said, adding that he anticipates the updated version to easily pass the Legislature this session.

To King, the Airbnb blacklist is an example of the law working precisely as he intended. “If Airbnb wants to go and boycott Israel, that’s your right as a company. If you want to discriminate against Jewish companies, you can do that. But we’re not gonna help you do that using taxpayer dollars.”

San Antonio evangelical pastor John Hagee and his influential pro-Israel group Christians United For Israel were a central proponent of Texas’ anti-BDS law and have led the charge against Airbnb. “The anti-Semitic BDS movement is trying to achieve through boycotts what terrorists and hostile nations have failed to achieve with bullets: the end of the modern state of Israel,” Hagee said in a statement applauding Texas’ Airbnb ban.

In reaction to the ascendant BDS movement, more than half of the country’s states, including liberal strongholds California and New York, have passed similar laws. But Texas is only the second state to ban business with Airbnb since the company’s November decision. Newly elected Florida Governor Ron DeSantis, a Trump conservative, called for a state boycott of Airbnb in January.

Under Texas law, Airbnb has 90 days to prove to the comptroller that it doesn’t boycott Israel. Airbnb denies that its West Bank policy is anti-Semitic. “We unequivocally reject and oppose the BDS movement and are disappointed by the decision [by Texas state officials],” the company said in a statement to the Observer.

A search of Texas vendor payments shows that the state has never paid money to the company, according to the Comptroller’s Office, and state employees generally do not book travel accommodations using Airbnb.

The short-term rental giant announced in November that it would ban the listing of rentals in settlements, which most of the international community view as illegal, in Israel-occupied West Bank.

The move may have a substantial impact on Airbnb’s profit margins, particularly because the company is preparing to go public. “We needed to get out front and let [Airbnb] know that the $250 billion that pensions invest in Texas cannot be used to buy any Airbnb stock,” King said.

The Comptroller’s Office notified the state pension funds that they are required to divest from Airbnb. Employees Retirement System of Texas, the state’s second-largest pension fund, has an indirect investment of $460,000 in Airbnb through a multi-layered fund, according to ERS spokesperson Mary Jane Wardlow. “The statute says private market funds should be asked to consider the list and see if there is a way to avoid these investments, since investors don’t have discretion on private market funds with divestment. That process will be underway,” she said.

State pension funds make up a huge chunk of the money flowing into the investment market, and Airbnb could quickly find itself in trouble if the more than 25 states with anti-BDS laws follow suit and label it as a company non grata.

Correction: This post originally reported that the Employees Retirement System of Texas has an indirect investment of $495,000 in Airbnb. In fact, the ERS has an indirect investment of $460,000. The Observer regrets this error.