I read the Bitcoin Foundation's arguments against the California Regulators and that's not the argument they used.  The CA regulators were arguing that the Bitcoin Foundation was engaging as a money transmitter and the Bitcoin Foundation replied that they are not.  Their argument is that they aren't doing any money transmitting, and that even if they were, they aren't doing business in California so that the California Regulators have no grounds to regulate them.  See their letter for the full details of their response.