I couldn't find it spelled out in the article what portions of the law Tesla is not following. But upon reading it[0] it is clear Tesla could not possibly comply. There are requirements such as reporting in advance which roads the cars will be tested on. (I assume saying "all roads" would be a non-starter with the DMV.) And each test-driver needs an individual permit. So if it is found that Tesla's FSD falls under this law, they have to disable or severely limit FSD in California.
I found the argument in the article quite strong that indeed FSD falls under that law. So I'm wondering what will happen next. Will the California DMV dare anger those who sunk money into FSD? Or will the DMV just turn a blind eye until there's a crash with a stroller and that will force them to act?
[0] https://www.dmv.ca.gov/portal/file/autonomous-vehicles-testi...