It's not illegal to develop a game for a fan community as long as you aren't making profit off of that game.
This is actually a common misconception. Just because your work is non-profit, does not necessitate that it is protected by fair use.
See "Noncommercial use is invariably fair" under wiki:Fair_use#Common_misunderstandings
For example, BYOND has received and had to comply with several copyright infringement DMCA take-down notices; including Dragon Ball Z games, Final Fantasy games, and several others.
I mean no disrespect in any regard, however this is an ignorant point of view on an intangible "issue." Fan-Games are copyrighted, yes. Most, if not all Fan-Games do not have proper licensing, yes. But they are called "Fan-Games" for a reason. It's not illegal to develop a game for a fan community as long as you aren't making profit off of that game. If anything, Fan-Games are free advertisements and promotion to their respective owners, but should still be handled with care.
Fan-Games on BYOND are not breaking any copyright laws nor should they be banned unquestionably. The problem comes when developers argue and bicker over who is the "Original" owner of those low-quality games. If people would stop making rips as if it gives them some respect, it could be cleaned up. When they can be cleaned up of the garbage games, the ones still standing can be polished into something enjoyable because, let's be honest, it doesn't matter how popular your Naruto game is, take GOA for example. Very popular game, but in my opinion, still a very low-quality, unpolished project that seems barely out of its Alpha infancy.
If people had the drive to make something new and improved with Fan-Games, their reputation can return, however this Order of Precedence that has been set basically says that, "All fan games have to be made this way: Train Spam, Train Spam, Unregulated PvP, ect." When people begin developing Fan-Games with this mindset, nothing is progressed and, if anything, only regressed. I can't wait until the day that a team decides to make a quality Fan-Game on BYOND, and change the way things are done in that corner of the community.
Originality is sacred, but learning from others is the best way to advance yourself as a person.