ATF figured out what I posted a few days ago.
With over 5 million braced pistols with barrels under 16", they are "in common use", with "in common use" being the operative phrase in Heller. If the ATF continued to push this, and it went before the current Supreme Courts, not only would they loose big time but it's likely all SBR regulations would be shot down, and call into question the totality of the NFA act.
It's likely this is a just strategic retreat by the Post-Modern Commie Marxist ATF.