The History of Drop-In Auto Sears
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When Colt decided to sell a semiauto-only civilian version of its AR-15 rifle, it had to make a number of changes to the design of the lower receiver to prevent full-auto fire control parts from being used. These changes would make a semiauto AR receiver legally distinct form a full-auto one, and thus not a machine gun in the eyes of the law. Among the changes Colt made was to remove the auto sear, along with its pin and mounting holes.
Now, at this time (and still today) the possession of full-auto fire control parts was not regulated. Owning an unregistered machine gun receiver was illegal, but the internal parts were not machine guns by themselves. The DIAS, or drop-in auto sear, is a small device that was invented to duplicate the function of the original auto sear without needing a mounting pin. It could simply be "dropped in" to a semiauto AR receiver and if used in combination with some of the full auto fire control parts it would result in a fully automatic rifle.
When the DIAS was first invented, it fell into the category of other fire control parts - it was not regulated in any way. They were very simple and cheap to make, and were widely sold by mail order. It was illegal to put one into a semiauto rifle, but not illegal to own one. This changed in 1981 when ATF realized what the DIAS really was, and by administrative decree the DIAS was redefined as a machine gun by itself, thus illegal to own. However, examples manufactured before the ruling were grandfathered in - not that there was actually any way to prove when a DIAS had been made.
In 1986, the Firearm Owners' Protection Act (best known for its Hughes Amendment which closed the machine gun registry) was passed. It did many things - some of them actually good - but it also legally redefined the DIAS as a machine gun in and of itself. This set the old ATF ruling as actual law instead of administrative whim, and also overrode the original grandfathering. Ever since, possession of an unregistered DIAS has been a crime.
However, until the Hughes Amendment closed the registry, it was perfectly legal to register a DIAS, thus making it a LEGAL machine gun. Many of these registered DIAS remain on the registry today, where their value has climbed to nearly that of an actual registered M16 by virtue of the legal paperwork. By weight, a registered DIAS today is worth ten times more than gold...