Paypal may be backing down.:
Smashwords posted a
quick note today (dated Mar 12, if it matters in the future; no option to link to indiv. updates):
I met with PayPal this afternoon at their office in San Jose. They will soon announce revised content policies....
Details not yet available, but Smashwords is going back to its former content policies yaaay!
Bitmag talked to some people at the EFF, who have a "good feeling" about
negotiations with PayPal:
PayPal’s general counsel indicating that they would be “discussing it internally and might even be able to make a public statement in the next week.”
The EFF, she notes, specifically has requested that PayPal “update their policy so that this type of legal fiction would not be affected.”