But lest you think that the driving force behind PayPal's pressuring booksellers to dump certain book genres was, in fact, PayPal's initiative, Smashwords outlined what's actually behind the whole fracas in (the highlighting is mine):

"Over the weekend, many Smashwords authors and publishers demanded we abandon PayPal and find a new payment processor. It's not so simple, and it doesn't solve the greater problem hanging over everyone's head. PayPal is trying to implement the requirements of credit card companies, banks and credit unions. This is where it's all originating. These same requirements will eventually rain down upon every other payment processor. PayPal is trying to maintain their relationships with the credit card companies and banks, just as we want to maintain our relationship with PayPal. People who argue PayPal is the evil villain and we should drop them are missing the bigger picture. Should we give up on accepting credit cards forever? The answer is no. This goes beyond PayPal. Imagine the implications if credit card companies start going after the major ebook retailers who sell erotica?"

Of course, PayPal in frames the matter in a distinctly weasely way:

"Our primary interest in this matter has always been to come to a mutually agreeable solution that allows freedom of expression, while still ensuring PayPal is used in ways that fully comply with applicable laws and our policies."

We know what "applicable laws" means ... it's that tricky area that involves First Amendment rights and the definition of illegal porn is "text and obscene images ... as defined by the U.S. legal standard for obscenity: material that appeals to the prurient interest, depicts sexual conduct in a patently offensive way, and lacks serious literary, artistic, political or scientific value ..."