The New South Wales Government has withdrawn prosecutions against two dozen Uber drivers.

While ride sharing is still illegal, the Government has withdrawn the action due to a lack of evidence, a decision welcomed by Uber.

"No-one should be penalised for providing safe and reliable rides in their city," the ride-sharing service said in a statement.

"The people of Sydney are voting with their feet — almost 4,000 Sydneysiders are now earning a flexible income on the Uber platform and hundreds of thousands are choosing Uber to get around their city."

The ride-sharing industry has come under criticism from the taxi industry for not being regulated and taking away passengers.

Earlier this month, the State Government announced it would hold an inquiry to look at regulating Uber as part of a wider review into the challenges facing the taxi industry.

The independent taskforce will examine "point-to-point transport" including taxis, hire cars and ride-sharing apps.

Uber said it was happy to cooperate.

"The review of the point-to-point industry is the right forum for discussions on how to enshrine sensible, safety-based ride-sharing regulations and we look forward to making our submission in the coming weeks."