It's funny that even a "naive" college-aged kid can look at the situation and determine on his own that it doesn't look quite right, but so many others seemingly couldn't.
I suspect most people fully understand that things are questionable at the very least. But they usually think they're more intelligent and they'll be able to skirt around laws by creative usage of terms or betting on being technically correct.
As the old saying goes:
It is difficult to get a man to understand something, when his salary depends on his not understanding it.
As the old saying goes: