(Reuters) - The Los Angeles City Council voted to rescind a newly enacted ban on storefront medical marijuana shops on Tuesday, allowing the city to avoid a referendum next year that some officials said would likely succeed in reversing the prohibition.

The council, in a blow to an industry that operates in violation of federal law, voted in July to ban pot dispensaries and replace them with a system that would allow up to three patients to collectively grow marijuana.

But medical marijuana advocates collected in August the necessary 27,425 valid signatures to put the decision to a March 2013 referendum. Under city rules, that number of signatures - 10 percent of the total number of votes cast in the city's last mayoral election - put the ban on hold until the vote.

The backtracking comes a week after federal authorities moved to close about 70 such dispensaries in the city in a renewed effort to crack down on the operations through the use of asset-forfeiture lawsuits and warning letters.

"Legally it appears that almost nothing we do is a surefire approach," City Councilman Paul Koretz said during the meeting on Tuesday.

"But I think the surefire least positive approach is to have a ban, but have it on hold ... have it fail in March and basically be back where we started," said Koretz, who voted in favor of repeal.

Pot remains illegal under federal law, but 17 states and the District of Columbia allow it as medicine. Los Angeles has between about 500 and 1,000 medical marijuana dispensaries, more than any other city in the nation.

Medical marijuana in California, which in 1996 became the first state to allow it, is used to treat everything from cancer to anxiety, and many police officials complain recreational users are taking advantage of the system.

The Los Angeles City Council's decision to repeal the dispensary ban must return for a second vote next week because the 11-2 vote was not a unanimous one.

Separately, the council approved a resolution asking the state Legislature to give municipalities clear guidelines on how to regulate the distribution of medical marijuana.

Councilman Mitchell Englander complained that many badly run dispensaries in the city have "ruined it" for a minority of storefronts that are truly helping patients.

City Councilman Bill Rosendahl, who has cancer and diabetes and has taken medical marijuana, made an impassioned plea during the meeting for allowing a limited number of dispensaries.

"Where does anybody go, even a councilman go, to get his medical marijuana?," Rosendahl said in a hoarse voice, moments after revealing that doctors told him he might not have "much time to live."

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