It's not, until the Supreme Court rules. (A denial of cert. ends the case as far as the parties to that particular appeal are concerned, but sets no precedent for other cases.) The Arizona AG is just looking for an excuse not to continue to press the issue.
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The AG in most states also has a legal obligation to defend the State’s laws until there is a clear declaration by the highest court that it is unconstitutional/unlawful. But when the AG doesn’t want to uphold the law (think California as another example) the administration and AG just roll over and play dead.