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I think the 40mm is an NFA item. The 38mm isn't, but the extra 2mm makes it super duper deadly and needs to be controlled and regulated.

Bummer, 'cuz I only wanna rock a forty when I go out to party...

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40mm is indeed NFA (destructive device), and each HE grenade is also a destructive device. That said, the 40mm with LTL projectiles is pretty damn effective and a hell of a lot of fun to shoot.

I also play around with the 37mm stuff... it's indeed not a DD, however, if you have any kind of anti-personnel ammo, like baton rounds, rubber-buck, etc, it becomes a DD. The main difference between the two is the 37mm is a smooth-bore, and the 40 is rifled, which makes it a hell of a lot more accurate, whereas the 37mm is essentially a gargantuan low-energy shotgun (you're peaking at about 400FPS in both)

Where the 37mm really shines is in launching smoke, illumination flares, tear-gas, and the muzzle blast of the black-powder that typically drives these things does quite a bit to dissuade potential aggressors.

I'm really into 37mm stuff. It's a lot of fun.
 
And 37mm stuff is not as prohibitively expensive as 40mm stuff too ;)
However there IS a potential NFA problem with using a 37mm or 40mm "airsoft/paint grenade" launcher because of the "anti-personnel" terming. I was looking at one particular "airsoft/paint" launcher that uses canistered rounds and is all metal/steel construction.. the rounds way of being activated seems to be too similar to the real deal other than the spring used.. the canister contains a gas system meaning it is basically a precharged gas canister; but the striker system is nearly the same as a real deal low-hi pressure launcher's system.

Edit; i am not saying theyre the same no. Thats asking for trouble ;)
Isnt there a website about making your own 37mm shells for smoke/effects and also had plans for sten guns as well as the bare tubes for them?
 

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