Uber has withdrawn its self-driving cars from California roads after state regulators moved to revoke their registrations.
The move comes after a week of talks between the ride-sharing company and state regulators failed.
Hours after Uber launched the service in its home town of San Francisco on December 14, the Department of Motor Vehicles threatened legal action if the company did not stop. The cars need the same special permit as the 20 other companies testing self-driving technology in California, regulators argued.
Uber maintains it does not need a permit because the cars are not sophisticated enough to continuously drive themselves, although the company promotes them as "self-driving".
The DMV said the registrations for the vehicles were improperly issued because they were not properly marked as test vehicles. It invited Uber to seek a permit so their vehicles could operate legally in California - an offer the company said it did not plan to accept.
Uber said that it was looking for where it could redeploy the cars, but remained 100% committed to California and would redouble its efforts "to develop workable statewide rules".
San Francisco Mayor Ed Lee said he was "pleased to hear that the DMV took enforcement action".
He said: "I have always been a strong supporter of innovation and autonomous vehicle development and testing, but only under conditions that put human, bicyclist and pedestrian safety first."
The ride-sharing company says the cars must constantly be monitored by a human driver trained to take control at any time, so they do not fall under California's permitting requirements for "autonomous vehicles".
Arguing over the definition of an autonomous vehicle is the latest example of Uber testing legal boundaries.
In recent years, the company has been in conflict with authorities in California and elsewhere about how to check the criminal backgrounds of its human drivers and whether those drivers should be treated as contractors or employees.
San Francisco is Uber's second self-driving city, and its first cars have been cruising around Pittsburgh since September. The testing lets Uber identify problems and gives everyday people a chance to interact with the technology - whether as a passenger, pedestrian or driver in another car.
As its engineers improve the technology, Uber plans to bring self-driving cars to other cities.
Operating without a permit arguably gives Uber a competitive advantage. Companies with one must report all crashes to the state and every instance in which a person takes control during testing. All that information is public.
Waymo, a self-driving company created by Google that has a state permit, has disclosed 29 accidents involving its vehicles on public streets since 2010.
In Pittsburgh, Uber has not been required to release any information about crashes.
Waymo chief executive John Krafcik declined to discuss Uber specifically when asked last week about California's permitting requirements for testing self-driving cars. But he said: "If there is a competitor taking unnecessary risks, that could be a bad thing."
It did not take long for Uber's self-driving cars to draw unwanted attention in San Francisco. Several witnesses documented instances where Uber Volvos did not stop for red lights.
Uber said one incident in front of the city's Museum of Modern Art illustrated why its cars require constant monitoring by a human driver - and therefore did not need a state permit.