The law was more like, "You must have a medallion to operate a cab. We only issued 10k medallions (or whatever). The medallions are transferable. We're not issuing new ones."
Combined with the supply of cab labor, that had the effect of, "if you want to operate a cab, you need to buy one from an owner at the current absurd market price".
Isn't it ironic that taxi drivers having gone in debt to buy a medallion are now financially destroyed by a company spending more than it takes in? Medallion asset bubble destroyed by Uber valuation bubble.
Combined with the supply of cab labor, that had the effect of, "if you want to operate a cab, you need to buy one from an owner at the current absurd market price".