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Xbox has reportedly started suspending players who run emulators in retail mode | VGC
(www.videogameschronicle.com)
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I don't think it's about threatening with legal actions but more about keeping a good relationship with Nintendo. They probably just asked them to remove it from there retail side because they didn't like it.
But you can still run emulators on the developers mode without problems, you only need to pay a fee to get access to the mode.