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Now, I am not a lawyer and this sure ain't legal advise. But at a certain point you really have to wonder. The game Super Mario Crossover uses illegal assets and the owner Jay Pavlina seems to be no literally bragging that he makes money from the game. It even seems that the revenue from Super Mario Crossover supports him so he doesn't have to work a job like normal people.
It looks like a Kickstarter backer, Dag Härdfeldt, has even let Nintendo know about this.
Honestly, if Nintendo knows about Super Mario Crossover and that Jay Pavlina makes money from it and it has not received a cease and desist, it is almost like Nintendo has said, sure its ok, go ahead and use our assets and profit from them. We'll see what happens I guess.
Though how would Nintendo even contact Jay? He hides behind a "contact form" on his site with no email address.....