CHICAGO (CBS) — Taxi companies and drivers have sued the city of Chicago, claiming newly proposed regulations for competing ride-sharing companies don’t go far enough, and alleging the city has allowed an “unlawful taxi caste system” to emerge.

WBBM Newsradio’s Mike Krauser reports members of the taxi industry said ride-sharing services such as Lyft, Uber, and SideCar should face the same regulations as cab companies and drivers.

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Attorney Michael Shakman represents the plaintiffs in a federal lawsuit that alleges the city “encourages a special class of unlicensed taxis” in violation of the law.

“It is an exclusionary, elitist taxi system, operated side-by-side with the lawful, highly-regulated taxi system,” Shakman said.

The lawsuit alleges the lack of regulation for ride-sharing services allows for discrimination against the disabled, anyone who doesn’t have a smart phone or credit card, and people living in lower-income neighborhoods.

“What it’s doing is very poor public policy, intended to essentially benefit a group of Silicon Valley companies, and to benefit a relatively small portion – way less than half the ridership of the city – and to leave the most vulnerable and needy users of taxi services in the city without service,” he said.

Unlike cab companies, ride-sharing services are not required to offer vehicles accessible to the disabled.

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“People with disabilities are going to be shut out,” said Brad Saul, founder of Chicago Disability Transit. “This separate system doesn’t have to play by the rules.”

Ride-sharing services also do not have to take customers anywhere they want to go — they simply connect customers with drivers who might or might be willing to take them to a specific location. Customers can only sign up for ride-sharing services using smart phones and credit cards.

Shakman said the city discriminates against taxi owners who follow the rules for cab companies and drivers, pay the required taxes and fees, and comply with safety and licensing requirements, while allowing companies that provide an identical service to go unregulated.

“The Emanuel administration has tolerated an unlawful taxi caste system created by Uber, Lyft and SideCar,” he said.

The suit comes a day after Mayor Rahm Emanuel introduced plans to impose the first set of regulations on ride-sharing companies as “transportation network providers” required to have insurance, pay a $25,000-a-year fee, and pay a $3.50-per-day-per-vehicle ground transportation tax.

Cab companies argue those fees are insignificant compared to those imposed on the taxi industry, noting the medallion required for a licensed taxi costs about $350,000.

While the city sets the fares taxis are allowed to charge their customers, the mayor’s proposed regulations for ride-sharing services would allow drivers and passengers to negotiate prices based on time and distance. Ride-sharing companies also would be allowed to charge customers much higher prices based on demand, such as when there is bad weather.

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Meantime, taxi drivers have gone nine years without the city allowing a fare hike.