Hours after Uber began offering people in San Francisco rides in self-driving cars, California regulators told the ride-hailing company to stop and said it could face legal action if it does not get a state permit.

Uber started a public pilot programme in the morning, and by mid-afternoon, the California Department of Motor Vehicles sent the company a letter saying the service was illegal until it got a permit required for putting autonomous vehicles on public roads.

Uber knew about the requirement but argued that its cars do not meet the state's definition of an “autonomous vehicle” because it requires a person behind the wheel to monitor and intervene if needed.

Making the distinction on the definition of an autonomous vehicle is in line with Uber's history of testing legal boundaries. Although the company has been around less than a decade, it has argued with authorities in California and around the world about how much of its drivers' histories should be covered in background checks and whether those drivers should be treated as contractors ineligible for employee benefits.

“If Uber does not confirm immediately that it will stop its launch and seek a testing permit, DMV will initiate legal action,” DMV Chief Counsel Brian Soublet wrote.

He did not specify what that might entail but referenced the possibility of taking Uber to court.

Uber did not immediately respond to a request for comment, so it was unclear if it stopped the service.

Its hometown launch earlier in the day expanded a deployment of self-driving cars it started in Pittsburgh in September. The testing lets everyday people experience the cars as Uber works to identify glitches before expanding the technology's use in San Francisco and elsewhere.

It deployed a “handful” of Volvo luxury SUVs - the company wouldn't release an exact number - that have been tricked out with sensors so they can steer, accelerate and brake, and even decide to change lanes.

The cars have an Uber employee behind the wheel to take over should the technology fail. Users of the app may be matched with a self-driving car but can opt out if they prefer a human driver. Self-driven rides cost the same as ordinary ones.

California's DMV has issued permits to 20 companies for tests of autonomous vehicles on public roads, mostly traditional automakers and tech companies.

Getting a permit for prototype testing is part of legal language negotiated between the state and industry, and DMV lawyer Soublet argued in an interview that the process helps maintain public confidence that the technology is safe.

“Don't start doing this stuff. Apply for the permit. Follow the rules,” Soublet said of Uber.

The company argues that its cars aren't covered by the permit requirement, which says an “autonomous vehicle” requires a permit if it can drive itself “without the active physical control or monitoring of a natural person.”

According to Anthony Levandowski, the leader of Uber's self-driving programme, Uber's cars simply aren't advanced enough to drive themselves without human monitoring.

“We're just not capable of doing that yet,” he said. Therefore, the Volvos are not autonomous and do not require a permit, he said.

It makes no sense to follow rules that do not apply, Levandowski said: “This is where science and logic needs to trump blind compliance.”

Operating without a permit arguably gives Uber a competitive advantage. Companies with one must report to the state all crashes and every instance in which a person takes control during testing. All that information is public.

To receive a permit, a company must show proof of insurance, pay a $150 fee and agree that a human driver can take control of the vehicle.

The congested streets of San Francisco offer a big challenge: famously steep hills, frequent fog, street and cable cars, an active bicycle culture, and roads that are constantly being repaved or remarked.

Uber believes its technology is ready to handle all this safely, though its executives concede a human driver is needed to take control in dicey situations.

Uber's fleet of Volvo XC90s aren't the first self-driving cars on San Francisco streets - several other companies visit regularly with test prototypes, though none offers public rides.

Once testing is complete, the ultimate vision is to sell to the public technology that supporters argue will save thousands of lives because it doesn't drink, text, fall asleep or take dangerous risks.