There's a very MAJOR difference here. Fair use doesn't apply to full copies of a product except in *very* *very* slender ways. For something to be fair use, the portion of the game you use must be relatively small in comparison to the full game, does not harm the owner, blah blah blah. Having a copy of a ROM fails fair use in almost every way possible if you read up about it. Where fair use applies is when you decide you want to use a graphic or sound effect from the game somewhere else.

There's no concept of "space shifting" here. You're straight up making a copy of a full product. There's nothing that allows that and it is fully illegal.

Encryption isn't the only way you can protect your games from being copied. Nintendo has successfully argued that the fact that they use their own custom made cartridges instead of a widely used format *is* protection. They also made similar arguments against importers (one of the main reason why carts weren't directly compatible between US and Japanese consoles).