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Mike,
Let me give you an easy settlement scenario
Feds and FSC agree to drop TRO but allow suit to proceed. Feds in return offer to not prosecute FSC members for violations of the new 2257 laws (not the old ones mind you just the new regs) while suit is pending. Feds will likely include language in their settlement that specifically grants the feds the right to investigate and prosecute FSC members for crimes not related to the specific application of 2257 (like in your example child pornography which is ALWAYS been illegal and is not part of any challenge by the FSC).
Settlements have always been an integral part of the Justice System in the USA and Prosecutors are given tremendous leeway in their dealmaking.
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