During some committee meeting last year, maybe on an item about mobility options, I remember hearing staff providing rationale to a councillor about the ban and they said because of the frequency and size of potholes on Toronto's roads, which are larger than what e-scooter wheels are designed to handle, allowing them on the streets would put the city at risk of litigation from injuries...
Pretty goofy rationale IMO. I think the bigger factor is that constituents would go apeshit if council made them legal and I'm sure staff isn't going to legitimize that as a reason.