Smashword's TOS already precluded child pornography, but now PayPal wants them to also censor depictions of consenting, non-related adults acting out incest fantasies. Likewise fantasy novels in which human characters transform into non-humans are affected if those characters have sex. ZDNet has a summary of the impact of these changes, which would among other things ban Vladmir Nabokov's *Lolita*.
As outrage mounts, finger pointing is in full swing. Smashwords blames PayPal, and PayPal blames the banks it deals with. The crux seems to be that erotica buyers have a higher rate of "chargebacks" — customers who buy stuff then demand their money back. Fair enough, but is a customer really more likely to return a book because it depicts one kind of fantasy between consenting adults vs. another? Perhaps the problem is just the quality of writing.
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