That is interesting. I have some doubts about their claim that this escapes regulation of escrow services (it sounds good, but their argument may not hold sway with regulators). But it seems like a very practical and useful system that shows the kind of thing that could ONLY be done with Bitcoin, and NOT with traditional money.
I had a lawyer working with me on that project, and he approved those texts. It is a bit of untested territory, so he might be wrong, be he's pretty confidence that this doesn't fall under an escrow.
The arbitrator is not in control of the funds. He cannot defraud either merchant or customer directly. That is the nature of multisignature transactions. The law's got a lot of catching up to do.
Well, one of the general elements of this approach WRT regulatory regimes is that there really is much less _justification_ for heavy regulation.
With a normal escrow the escrow must be trusted to hold all your money! With this approach they can only release with the consent and cooperation of one of the parties.
The lower trust means such a thing would be fundamentally more difficult to regulate too, since it can come and go, disappearing into the mists because not so much trust is required.
You'll still have to trust that the arbitrator won't just co-sign with whoever offers them the most BTC. So, y'know... don't make just ANYONE your arbitrator.
