Philadelphia's 3D-Printed Gun Ban May Lead to More Government Regulation

Can you imagine a future where people carry 3D-printed guns as often as they do cell phones? Philadelphia does. It banned production of the firearms last week, becoming the first U.S. city to do so. Philadelphia's City Council says it is now illegal to construct "any piece or part thereof [a gun], unless such person possesses a license to manufacture."

The key thing to understand about Philadelphia's decision is that it's preventive in nature; the city is America's 12th most violent, according to the FBI. One councilman summed up the argument supporting the bill nicely:

As technology progresses, three-dimensional printers will become more advanced, less expensive and more commonplace. As instructions for the manufacture of guns via 3D printing technology are already available on the Internet, we could be looking at a recipe for disaster.

This is a legitimate concern. In May, Defense Distributed revealed it had designed a gun made almost entirely of plastic pieces from a Stratasys Dimension SST printer. The State Department confiscated the files for the firearm, but not before they were publicly available and downloaded by thousands. Torrent sites like the Pirate Bay still allow the schematics to be shared.

While it is understandable that lawmakers are concerned about gun factories popping up in homes across the country, it's worth asking the question: How deadly is a 3D-printed gun?

Killing power
Thankfully for us, Defense Distributed's creation was tested with a variety of ammunition.

YouTube capture: Liberator -- Dawn of the Wiki Weapons, Defense Distributed

As Forbes points out, the firing of a .380 caliber bullet leaves the 3D-printed gun entirely intact. Larger rifle cartridges, like the 5.7x28mm, cause the firearm to explode, making it deadly nonetheless. The ATF performed its own test, and concluded that even with .380 bullets, the gun has adequate killing power. Federal agents also cited a fear that 3D-printed guns, made of plastic, could be brought into areas protected by common metal detectors.

Degrees of regulation 
Obviously, this is still a legal gray area. Philadelphia's decision is one of the most extreme degrees of a ban, in that production of any gun pieces is prohibited. California, Washington D.C., and New York have also discussed the possibility of restriction at a state level, but no details are known. Judging by the fact that most early adopters of such a law would likely establish it for proactive, not reactive reasons, it's reasonable to expect that similarly comprehensive bans would be placed.

There are several layers to this onion, though. At the federal level, lawmakers may focus on the detectability of 3D-printed guns. The Undetectable Firearms Act, which was established in 1988 and requires all firearms to contain enough metal to set off a standard detector, expires early next month. A group of U.S. senators is pushing for an extension, which would likely force all 3D-printed guns to contain a metal strip.

This is an entirely different avenue than an outright ban. A renewed Undetectable Firearms Act would protect secure areas like airports and courthouses, but not the average person on the street. The federal route also doesn't address the issue of unlicensed gun factories popping up in homes throughout the country.

Thus, it appears that two levels of regulation will ultimately appear in the near future. In cities or states that want to prevent the use and distribution of 3D-printed guns, Philadelphia blazed a good trail to follow. Areas that are more lax toward firearms, like Arizona or Vermont, probably won't establish any laws on the matter anytime soon. They'll, in turn, be subject to the Undetectable Firearms Act, assuming it's extended.

The industry at large
Clearly, most people invested in names like Stratasys, 3D Systems , voxeljet , and ExOne are banking on a future where 3D printing is involved in all facets of life. If you're in this group, the main thing you're probably wondering is: how much would an outright federal ban hurt this industry?

For starters, it's important to understand the size of the 3D printing space. The entire market was worth a little over $2.2 billion in 2012, and is estimated to pass the $6 billion mark by 2017, according to Wohlers Associates. Revenue has grown by an annual rate of about 25% over the past 25 years. If Wohlers' projections hold, this expansion would accelerate to more than 40% a year over the next decade. Gartnerand SmarTechpredict similar growth over the next few years.

According to most of the data, the household printing sub-industry accounts for 25% to 50% of the entire industry, so theoretically, 3D-printed guns can act as a pretty significant demand driver. We already know that Stratasys manufactures a model that can produce firearms, and 3D Systems, ExOne and voxeljet printers should realistically be compatible with future designs.

At a conference earlier this year, 3D Systems' CEO called Defense Distributed's gun a sign of the "democratization of craftsmanship," while ExOne's recent focus on metal printing is seen by some as preparation for 3D firearms forged in iron, bronze, nickel, and pewter. Voxeljet's stable of printers, meanwhile, can seemingly offer options for gunmakers in search of high-volume, high-speed production.

To answer the question posed above: An outright ban on 3D-printed guns won't destroy the industry's red hot trajectory, but it may limit upside in the household printing space. In a worst-case scenario, growth of 25% a year is a reasonable expectation, which is a rate of expansion that's served investors quite well over the past few decades. At the end of the day, lower-cost printers and a greater adoption of modeling software are still the biggest factors at play here.

What to keep on your radar 
The next event on your radar should be the federal government's potential extension of the Undetectable Firearms Act. If it does pass, all 3D-printed guns will be required to contain enough metal to be detectable by standard security measures. For anyone invested in companies like Stratasys, 3D Systems, voxeljet and ExOne, though, the real thing you should be watching is city and state-level bans.

Traditionally restrictive areas like California, Washington D.C., and New York may follow in Philadelphia's footsteps in 2014, but at least for the foreseeable future, many states will likely remain ban-free. Because up to half of the 3D printing industry is made up of household printers, more designs from companies like Defense Distributed should theoretically act as a demand driver.

It's tough to project just how much a firearm boom could affect industrywide revenue, but the important takeaway is this: 3D printing companies arepaying attention to gun developments, and they arepositioned to capitalize on them. 

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Fool contributor Jake Mann has no position in any stocks mentioned. The Motley Fool recommends 3D Systems, ExOne, and Stratasys. The Motley Fool owns shares of 3D Systems, ExOne, and Stratasys and has the following options: short January 2014 $20 puts on 3D Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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