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The country claims Smith & Wesson and other gunmakers are turning a blind eye to hundreds of thousands of high-powered weapons made in the U.S that are illegally trafficked into in the hands of Mexican cartels.
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The ATF classifies the kits as firearms under the 1968 Gun Control Act, but kit manufacturers and sellers challenged the rule in court, asserting that the ATF had exceeded its authority.
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The government contends that ghost guns kits count as a firearm under a 1968 law. But those challenging the rule contend "a kit of parts is not a weapon."
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Polymer80 sold component kits that are easily assembled into working handguns that couldn't be traced. Regulatory pressure and lawsuits appear to have shut it down — but the Supreme Court may still rescue the business.
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The regulation was enacted at the behest of President Trump after the shooting at a Las Vegas concert killed 60 people and injured 400 — in 11 minutes.
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The law signed by Gov. Gavin Newsom was set to take effect Jan. 1. It would have prohibited people from carrying concealed guns in places including parks and playgrounds, churches, banks and zoos.
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If so, the decision would be a small retreat from the Supreme Court's sweeping decision on gun rights last year.
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If the federal law falls, so would similar laws in most states, and other important gun laws.
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Authorities are investigating shootings in Texas, Indiana, Florida, Illinois, Georgia and other states. Many of the shootings took place at the sites of large gatherings early Sunday.
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By a 2-1 margin, an appeals court ruled that the law will remain in place until after it hears arguments on a lower court's ruling that struck down the law.