Gun Control Rulings and Their Impact on the Firearms Industry: A Look Ahead

The U.S. appeals court’s recent rulings on federal gun bans for felons have reignited debates over Second Amendment rights, while also sending mixed signals to investors in the firearms industry. At the heart of the legal battle are two cases: U.S. v. Duarte (9th Circuit) and Morrissette v. U.S. (11th Circuit), which explore the constitutionality of lifetime firearm prohibitions for non-violent felons. As courts grapple with historical precedents and modern policy, the industry faces both regulatory risks and opportunities tied to shifting political winds.

The Legal Landscape: A Split in the Splits

The Ninth Circuit’s en banc decision in Duarte upheld the federal ban on felons owning guns, citing historical authority to disarm individuals deemed “special dangers.” This ruling aligns with four other circuits but sets the stage for a potential Supreme Court showdown if the 11th Circuit overturns its prior stance in Morrissette. The Supreme Court’s refusal to hear Morrissette directly but its directive to re-examine the ban under the Bruen test (which requires laws to mirror historical traditions) adds uncertainty.

Market Dynamics: A Post-Pandemic Decline with Underlying Strength

The firearms industry’s post-pandemic slump continues. U.S. gun sales fell to 15.3 million units in 2024, a 29.7% drop from the 2020 peak of 21.8 million. This decline reflects reduced “panic buying” and inflation-driven spending cuts, particularly in states with stricter laws like Washington, where sales dropped 43% in December 2024. However, the industry remains economically robust:
- $90.06 billion in total economic activity in 2023, supporting 384,437 jobs.
- $10.9 billion in federal and state taxes, including $944 million to wildlife conservation via excise taxes.

Despite these figures, production has slowed. Output dropped 36% between 2021 and 2023, from 23.4 million to 14.96 million units. Yet, manufacturers remain cautiously optimistic, citing long-term demand from a civilian gun stock exceeding 390 million and a 32% gun ownership rate among Americans.

Policy Crossroads: Project 2025 and the Gun Lobby’s Playbook

The Trump administration’s Project 2025 and Agenda 47 threaten to reshape the industry’s trajectory. Key proposals include:
1. Arming schools and public spaces via federal funding for armed guards.
2. National concealed carry reciprocity, overriding state-level restrictions.
3. Weakening oversight of gun dealers, including repealing the Enhanced Regulatory Enforcement Policy that required the ATF to revoke licenses of non-compliant sellers.

These policies could artificially boost demand by expanding buyer eligibility (e.g., reinstating rights for domestic abusers like Mel Gibson) and reducing operational costs for dealers. However, they risk backlash: 85% of Americans view gun violence as a problem, and 77% of parents fear school shootings.

Risks and Opportunities for Investors

• Upside: Pro-gun policies could reverse the sales decline by tapping into niche markets (e.g., school security equipment) and reducing regulatory hurdles. The reinstatement of gun rights for prohibited individuals could add 1–2 million buyers.
• Downside: Public opposition and state-level restrictions (e.g., assault weapons bans) could limit growth. The DOJ’s alignment with the gun lobby—evident in its reversal of accountability policies—may damage industry reputation and deter socially conscious consumers.

Conclusion: A Divided Market with a Fragile Outlook

The 2025 rulings and policies underscore a fractured landscape. While the Ninth Circuit’s decision reinforces the federal ban’s legality, the Supreme Court’s cautious approach in Morrissette leaves room for further litigation. Meanwhile, Project 2025’s aggressive agenda could temporarily lift sales but risks alienating voters and lawmakers.

Investors should weigh two key trends:
1. Structural decline post-pandemic: Sales have cooled, but the industry’s $90 billion footprint ensures resilience.
2. Policy volatility: Pro-gun measures may boost short-term gains, but long-term sustainability hinges on balancing public safety and profitability.

The industry’s future is tied to resolving these contradictions. For now, the market’s best bet may lie in companies diversifying beyond firearms (e.g., into hunting gear or training services) while monitoring legal battles and voter sentiment. As one analyst noted, “The gun industry isn’t just selling weapons—it’s selling a political narrative. That narrative’s durability will determine its value.”

In summary, the federal ban’s legal survival and the rise of pro-industry policies present a paradox: they stabilize certain segments of the market while exacerbating societal divisions. Investors must remain vigilant to navigate this volatile terrain.