Some law notes since the subject came up during session.
As mentioned, prostitution in and of itself is not illegal in the town. However, for a variety of reasons, there are people that don't like the trade. Some don't like its lack of regulation and taxation; some don't like its moral implications; some don't like the seedy elements that follow the business around; etc. The places the house the ladies are rarely raided as long as they don't make a spectacle of themselves. Those that wonder the streets are arrested on vagrancy, loitering, or some other change.