I am of course referring to the Stonewall Riots of 1969. I know that New York had laws against public homosexual acts but since Stonewall was a private club wouldn't it be legal? Also what was the legal basis on arresting crossdressers of both sexes?
On a very basic level, police raided gay bars like the Stonewall Inn very frequently and largely without explicit reason. Crackdowns on gay and lesbian bars (and on gay, lesbian, and "drag queens"/trans/gender-nonconforming people in general) were increasingly common throughout the late 60's, and were largely framed in the rhetoric of "cleaning up the streets" and preventing "indecency" and "crimes against nature."
Although police raids terrorized bar patrons, the raids were largely tolerated rather than explicitly resisted. Gay bars developed many strategies to deal with frequent raids. A majority of gay bars - at least in New York City - were controlled by the mafia, and it was not unusual for bar owners to pay off local police in return for being tipped off when a raid was due to take place. Additionally, many bars - including the Stonewall - used some kind of warning system to alert patrons that a raid was occurring. Often gay bars would have two or more rooms: a bar area in front with a dance floor in an adjoining back room. The Stonewall had lights in the back room that could be triggered from the bar, indicating that a raid had started and that folks should stop dancing (or trade partners in the case of mixed bars.)
Crossdressing was a frequent reason for arrests or police harassment. Primary sources frequently mention the struggles faced by butch lesbians, drag queens, and other gender-nonconforming folks in regards to clothing and gender presentation. Butch lesbians in the tough Buffalo, NY bar scene in the 50's and 60's recall a police rule that required 2 or 3 articles of women's clothing to be worn, lest they be arrested for crossdressing. One butch recalls her girlfriend forcing her to carry (the femme's) purse to keep in line with this rule; the butch - quite unused to carrying a handbag - proceeded to carry it "like a football" all night. It is unclear if the gendered clothing requirement was a law or merely a police practice of the time, although similar stories of the police enforcing gender presentation or specific articles of clothing were very common.
As to specifics of the police raid on the Stonewall that night, not a whole lot is known. It was, however, different from the usual raids that occurred in a few ways. The bar owners were not forewarned of the raid as they usually were, and the raid involved a higher level of law enforcement than would usually be involved in such raids. Although the raid prompted the riot that would kick off a political revolution it was not designed to be more harsh or punitive towards bar patrons than any other raid. In fact, most people were surprised at the radical and violent turn of events that occurred during and after the raid.
Sources/further reading:
Stonewall by Martin Duberman
Boots of Leather, Slippers of Gold by Elizabeth Lapovsky Kennedy and Madeline Davis.