Question: Assume this city is relatively large by late medieval standards, around 200,000 people. The city is mainly a site for trade due to its geographically central position and being on a river. Also, because it is geographically central, it also means the city is important for the government to project power.

**What might be the benefits for this same government to sanction certain crime within this important trade city?**

Crime that would be considered legal within city limits ranges from murder, burglary, trade of illicit substances, and racketeering. This is all under the condition that the crime does not directly affect the government's activities.

Answer: 
**Crime keeps people scared. Scared people want governments that are tough on crime. To demonstrate you are tough, you need criminals to punish.**

<https://www.foxnews.com/us/san-diego-homeless-attacks-help>

> 
> San Diegans beg city to curb violence by homeless: 'like you’re in the
> 'Walking Dead''
> 
> 
> 

What a packed headline - scared people begging the government for help, violence, and dehumanizing criminals by comparing them to zombies.

Your city government sells itself as tough on crime. Law and order. But if it is too good at its job, people forget about crime like people have forgotten about polio and measles because vaccines are too good at preventing disease. Your governments puts on a show of force, public discipline of criminals, etc. Maybe more like what we would consider a protection racket.

And they need grist for the mill - so crime is allowed in neighborhoods where people who are disloyal or dissatisfied with the government might live, to keep these malcontents scared. You can still satisfy your followers / customers with the punishment of criminals taken from places where criminals live. Maybe satisfy them better when they see the criminals as the dangerous "other".
We have good historical examples where this occurred because of jurisdictional confusion.

For example, the tangled relationship of royal and Church prerogatives in Europe in the medieval and early Modern period often allowed Church leaders to exempt people from royal laws while on their lands. For example, in an area that later became part of London that was known as the [Liberty of the Clink](https://en.wikipedia.org/wiki/Liberty_of_the_Clink), the bishop was able to license prostitutes, brothels, and theatres.

[Kowloon Walled City](https://en.wikipedia.org/wiki/Kowloon_Walled_City) came to be because of a complicated history of claims over a small area of land by the British colonial government of Hong Kong and the Nationalist and Communist governments of China. Britain did not want to govern the area, but also did not want to return it to Chinese jurisdiction. So you ended up with a sort of *Passport to Pimlico* self-organizing quasi-anarchy without official law enforcement.