Airbnb Inc. settled its lawsuit against New York state over a new law restricting short-term rentals, with both sides agreeing that New York City, not the state, is responsible for enforcing it.

Airbnb and New York Attorney General Eric Schneiderman agreed in court papers filed Tuesday that the state would be dismissed from the suit. A lawyer for the city told U.S. District Judge Katherine Forrest in a letter on Friday that the parties are discussing a resolution of the case and will update her on their efforts by Dec. 2.

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