That's how a lot of government rule-making works. The law says something general and the specifics are left to departments and commissions. In this case, it's not clear that this particular rule is outside the plain meaning of the law; they just hadn't gotten to writing it before because Tesla presents a novel circumstance. Of course, it's difficult to hold somebody accountable for breaking a rule that hadn't been written yet, so "actively breaking the law" is probably overstating it.

Secondly, if you can only sell through a dealership, why can't Tesla just own some dealerships?

I am not an expert, but I imagine the law was written in such a way that "franchise" is defined as an entity independent of any manufacturer.