Robert Cruickshank of Calitics lays it out.
So what does that all mean? Let me boil it down. Basically, California's constitution and various CA Supreme Court decisions in the last few decades have indicated that the initiative power is a right inherent to the people of the state, and does not stem from the Legislature. It sets up the people as a kind of fourth branch of government. And therefore, if the Governor and the Attorney General refuse to defend a proposition in court, that could essentially nullify the fundamental rights of the voters. Since ballot initiatives stem from the people, presumably the people - in the form of the initiative proponents - DO have standing to defend Prop 8 in court and to appeal it to the 9th Circuit in order to preserve the people's initiative power.
But because such a ruling would have a significant impact on future legal battles over California ballot initiatives, the 9th Circuit is deferring to the CA Supremes. The CA Supremes could say "yes, the proponents do have standing" or "no, they proponents do not have standing," or they could simply not respond at all. The first and third options are more likely, and based on the CA Supremes' longstanding (and I believe flawed) unwillingness to interfere with ballot initiatives, the CA Supremes will probably conclude that the Prop 8 proponents do indeed have standing to appeal.
In which case, the 9th Circuit would then rule on the issue of Prop 8's constitutionality. I am guessing that their ruling will be to uphold Judge Walker, otherwise they would just say Prop 8 is constitutional and moot the question of standing.
But this is precedent-setting, so they are basically saying "Hey look, California, you need to settle this 'We the People' argument." It's a necessary legal argument to resolve: if the Governor and AG refuse to defend a ballot initiative, can a group representing the people of California do so in court? Most likely the answer will be yes.
Down the road, that could be interesting for future ballot measures. But for Prop 8, it means that once the question of standing is settled, I'd have to agree with Cruickshank here that the 9th Circuit will uphold Judge Walker's decision...otherwise there's no reason to worry about the standing to overturn Walker because...he'd be overturned, solving the standing question as a definite yes.
Now it's entirely possible they could send it back to the California Supreme Court, they decide yes on the standing, and then the 9th circuit decides to overturn Walker, but again that seems unlikely.
It's also entirely possible that the California Supreme Court could say that the Prop 8 groups have no standing, in which case things get real interesting, and Walker's decision stands. It's possible that an immediate SCOTUS appeal would be made if that happened too.
However the most likely outcome seems to be that the CA Supreme Court grants standing, and then the 9th Circuit takes a chainsaw to Prop 8 as unconstitutional.
From there it goes to SCOTUS anyway, so. We'll see.
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