I've never played the game - not a big console fan. I hear it goes all devil-client in the end. I think this is one of the earlier cases, though.
The loophole, as you call it, is pretty big and important one for the furry fandom, and one not restricted to this particular situation. As I've said elsewhere, it is really not at all in our collective interests for furry characters to be defined as humans. If they were, half the furry adult art out there would be classified as bestiality - and half the nature videos as obscene snuff films. Fortunately, it is not; furries are not people, nor do they
look like people for there to be any confusion about whether real people (minors or otherwise) are involved.
As I see it, there are two possible situations:
* AAE had got wind that
lolicon was illegal with the Dwight Morely case, and so added a rule against it to cover their asses. When the news about EF hit, someone on the board then went "oh shit, this applies to furries, doesn't it?",
didn't hire competent legal advice to check (breaking a basic fiduciary rule: if you don't know what you're doing,
find someone who does), and told Softpaw that they were out of luck, no hard feelings.
* AAE hate "cub porn" and had this all planned from the start, but didn't want to look like the bad guys, so they slipped in a rule that they knew Jery and friends would assume wasn't intended to apply to them, then sprung it just before the time when it would have been contractual malfeasance
* if they didn't. Hoping to escape any criticism, they phrased it as a simple matter of law - "we'd love to have you, but our hands are tied". Unfortunately, they weren't smart enough to find a law that actually applied.
Maybe I've been taking that "assume good faith" thing a bit too literally, but I lean far more towards the former, particularly because the phrasing of the rule in the dealers' rules is poorly worded and conflates the two sections of the rule into one (it states that all depictions of sexually explicit conduct in minors are obscene - an assumption contradicted by several major movies). AAE are good people. They've just misunderstood the law.
As for ignoring the rule, if you already know your characters aren't legally classified as minors, why would you worry about it in the first place? It's not like this is anything new - the law dates to 1998 - so lawyers should be up to speed on its application right now. It is unlikely that Softpaw failed to acquire legal advice before going into business; given that it is the core of their business, they're probably willing to spend more on it than FC.
The big issue here is that this could spread into all sorts of other areas. If depictions of "minor furries" are considered illegal - which, again, they're not - you suddenly have to figure out who they are, which may be an impossible task. Consider
my character. If you didn't know, how old would you say he was? Major or minor? I happen to have
this to point to, but others won't. Will FC's dealers be forbidden from drawing such characters in mature situations? This is where misapplication of laws enacted for good reasons starts to trample on free speech that hurts nobody.
* IANAL: I don't know if "contractual malfeasance" is a proper legal term, but it sure sounds cool.