Here's how I determine whether or not I should be able to mod something. Would it be OK for me to smash to device to bits with a big fucking hammer? If so, I feel it's also OK to use a soldering iron to make it read non-special discs, too. Can you play pirated games with that mod? Yup. But consider this: it's legal to own a handgun, and even in unmodified form, you can use that gun to kill as many people as you want. Kill. Take away their life. Forever. And society is fine with people owning those, because they know that if someone kills as many people as they want to (and that number is more than 0), they will be brought to justice. It's worth letting that one psycho have a gun if it means everyone else can hunt animals or protect their families; that's what society has decided. Similarly, people should always be free to tinker with their devices (and even other people's devices, with those people's permission) because the potential positive value to society (a cheap workstation for elementary school computer labs) outweighs the potential negative value to society (someone playing Kill Zombies XXXIV without paying MegaGameCorp $85). Mod chips don't kill game companies, people do.
(Don't get me started on why the government thinks it's OK to put people in prison for growing certain plants in their own homes. I think it must be because some politician had a long talk with God, and God says he hates it when people enjoy themselves. Since God does exist and does talk to people on a regular basis, this sort of makes sense. But I digress...)