Returning to the original questions . . .
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Obviously, if your gun malfunctions in any way, stop shooting immediately until fixed.
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Obviously.
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But let's say it goes full auto at the range with an uptight leo watching.
Is that automatic felony and impounded?
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Yes, possession of an unregistered machine gun is a felony. No doubt about that. It is also defensible under the circumstances detailed in this thread (unexpectedly going full-auto). Were one of my guns to do this, I'd immediately drop the mag, unload, and start stripping the gun. I wouldn't want an operable FA gun in my hands without a stamp any longer than absolutely necessary.
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What is needed for defense?
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That will depend on the circumstances of how it all goes down. With that said, I'd think about things like whether there's video of the event, a sign-in sheet at the range from which witnesses can be located, etc.
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Are you ever going to get gun back, or at least sent directly to your smith of choice for repair?
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There's really know way of knowing for certain.