High-profile gene testing companies that operate in California include 23andMe, founded by the wife of a top Google billionaire, and Navigenics, based in Redwood Shores.

Both companies use DNA chips to scan a person's genome for gene variants that can be used to predict increased risk of developing a wide variety of diseases. DeCode Genetics of Iceland offers a similar consumer test.

California law requires that a licensed physician order any lab tests, including genetic tests, says Karen Nickel, chief of laboratory field services for the California Department of Public Health. All lab tests must also be validated for accuracy and medical utility, according to state requirements, Nickel says.

"These businesses are apparently operating without a clinical laboratory license in California. The genetic tests have not been validated for clinical utility and accuracy," says Nickel. "And they are scaring a lot of people to death."

Requiring that such tests demonstrate clinical "utility" could pose a particular problem if applied to 23andMe: The company has admitted its tests are not medically useful, as they represent preliminary findings, and so are merely for educational purposes.

California's move follows a crackdown on online gene testing firms by the state of New York, which sent warning letters to a number of firms, including 23andMe and Navigenics. California said its investigation followed a number of consumer complaints. "The consumers were unhappy about the accuracy [of the tests] and thought they cost too much," a spokeswoman for the department said