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Edit: Also, a lot of the comments are about the question of whether or not Nintendo should allow their games to be distributed on the eShop, which is a bit of a different subject from the main point being discussed here. The eShop isn't about allowing piracy, but rather about offering content at discounted prices and then providing customer support and other services.
As for the other comments about the lack of encryption, I was referring to the lack of encryption for the memory card, which is the driver of the emulator, and not the game itself. This requires the use of an non-2048 sector size disc, and thus the usage of a non-encrypted memory card. I don't think it is safe to assume that all game cards are encrypted with the same keys (without going out of the way and decrypting them in software), as it is possible to change the encryption keys from one game to another, and thus it is possibly that they used the same keys for both the game and the memory card. (although I think it is safe to say that the keys will be unique per game)
Most people don't care about their games being stolen. They just want to play the games they have paid for. If Nintendo tell emulators to take their games down, and they do it, they won't care about the fact that the original creator lost out on money, and the fact that the people making the game don't appreciate their work being stolen. There's plenty of money to go around, no-one will starve.
As for the current situation, I'm not a lawyer, but from what I've read, even if the game is freely distributed to the public, the person who owns the copy right can take legal action against any person who copies it without permission. In this particular case, the game is not freely distributed to the public, it was specially distributed to a group of people. It's very unlikely, but I'm not saying it's impossible, that the person who made it would take legal action against any person who plays it on a pirated emulator. So everyone is protected in this scenario, provided the person playing the game actually owns a copy of the game.
You could say they're stealing, and I would agree, but if they didn't pirate, then no emulator is available, and if no emulator is available, then people can't use the emulator to pirate games.
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