Apparently there isn't a law that prevents Axon or anyone else from capturing photos of vehicle license plates and using software to get the plate numbers. Even if there were it would basically be unenforceable. You can walk around with your cellphone taking snapshots of license plates and send them off over the internet for an AI or other paid service to extract the plate data for you. Axon does it at scale but anyone could do it on a small scale.
What happened is that they didn't follow the letter of the "ALPR Privacy Act". You can do it, but you have to disclose how you do it, and what you do with the data.
"has failed to comply with a California privacy provision by not disclosing how it collects, uses and shares plate data gathered through its camera systems"
"Axon collects California drivers’ vehicle and location information and does not tell them what it does with it."