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Subscribe to Portfolio magazineIs reading someone's genetic code the same thing as practicing medicine? That issue has always loomed over the nascent direct-to-consumer genetic-testing industry, which includes such well-known names as 23andme, Navigenics, and DeCodeMe.

It has become very real now that California public-health officials have ordered 13 online companies to immediately stop offering their services in that state.

The companies offer genetic tests that look for DNA mutations associated with a higher risk of developing heart trouble, dementia, or other maladies. Some critics have said that the science behind some of these tests is relatively new and may be incomplete.

Others say the tests are dangerous because they can identify risk factors for some conditions that have no treatment, such as Alzheimer's disease.

The California Department of Public Health contends the services violate medical-testing rules that require a physician's involvement and proof that tests produce a valid medical result.

The real issue, however, may be as much about turf and how society will react to this new technology as patient safety.

Companies offering the tests have made a point of sidestepping doctors, insisting that consumers have a right to know the information coded in their genes. They also have said that the results they deliver are informational, not diagnostic.

Bypassing traditional medical outlets is an important issue for these companies, since much of the medical establishment hasn't yet embraced widespread genetic testing. Traditional health-care providers tend to be skeptical of the usefulness of the results.

That skepticism would not bode well for a business model that depends on them to be the gatekeepers for ordering these tests. Requiring a doctor's approval also seems overly paternalistic to many believers of the Web 2.0 ethos of free access to personal information.

In the past, the state public-health department has laid out five criteria for direct-to-consumer genetic testing companies:

Is there a California licensed physician involved?

Are tests being authorized by a California licensed physician?

Does testing include pre- and post-test counseling?

Are tests being conducted at CLIA Certified [federally approved] labs?

Are the tests validated?

The answers to these questions vary by company, and some of the questions are being debated as to exactly what they mean.

All three of the biggest providers—23andme, Navigenics, and DeCodeMe—conduct their tests in labs that have been federally certified, for instance, but do not offer counseling. One, Navigenics, says it uses doctors to process orders.

The question of what is meant by a "validated" test is also open to debate. The tests are all "valid" in that they usually provide accurate information about one's genetic makeup—that is, whether one has a particular base (adenine, cytosine, guanine, or thymine) at a particular spot in their genetic code.

But most of the tests have not yet been through rigorous testing with human trials to confirm their accuracy and validity as predictors of risk factors for disease.

California's move comes several weeks after its health department said it was investigating consumer complaints against online-testing sites. Karen Nickel, chief of laboratory field services for the California Department of Health, recently told Forbes: "The tests have not been validated for clinical utility and accuracy, and they are scaring a lot of people to death."

New York State has also written to several online genetic-testing firms warning them they are not in compliance with similar laws in that state. The companies have suspended operations there as they hold discussions with authorities.

The federal Department of Health and Human Services plans to hold hearings in Washington next month to investigate online genetic testing. The hearings could lead to federal regulations.

As society sorts through the promise of this technology, doctors, hospitals, and other powerful economic and political stakeholders are likely to join the debate. Public-health bureaucracies also will continue to weigh in if they feel that these tests are a danger to the public.

Eventually, the stakeholders will come together, as they should, to forge a new mandate. What exactly this new DNA regime will look like will depend on all parties working together to insure what I believe should be three criteria for genome-wide genetic testing:

Individuals have freedom of access to their personal genetic data.

A system of trials and approvals be implemented that insure the validity of genetic tests and risk factors.

Doctors and other experts have a vital role in the analysis of disease-oriented information and should use it as part of an overall diagnosis for a patient's health.

Balance is the key here, as in so many debates about markets. Overregulation can squelch innovation; under-regulation may lead to commercial abuse, consumer confusion, and distrust of these tests.