The NYPost story includes the detail "We bought stock in a special acquisition vehicle and then the individual investors in the special acquisition vehicle shorted shares through Morgan Stanley ... Pre-IPO investors are contractually barred from reducing their “economic interest” in Lyft for six months, which includes shorting the stock. But sources say Lyft investors worked around the lock-up language by positioning the bets so that they won’t benefit from a decline or a rise in the stock. Instead, they simply lock in their IPO gains, which were significant."
Obviously, if the investor engages in a transaction that leads to them to not benefiting from a rise in the stock, they've reduced their economic interest!
The answer (as I note elsewhere) is that the investors believe Lyft's lock-up language does not per se bar them from reducing "economic interest". The loose agreement only bars selling and presumably short-selling shares.
Hacker News: where anonymous commenters ask you to believe them over the professional financial reporter.
You've put your finger on the core of the legal dispute, what "reducing economic interest" means. The reporter did an excellent job explaining that. Now it'll be up to a court to figure it out.
Sounds like they were reducing their economic interest.