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Microsoft are allowed to do so in this case because they are the owners of the software - they can license the software they own under any terms they want. In this case though, I'm sure there will be terms that prevent you from offering the VMs as a service to others for a fee.

Microsoft are definitely not 'someone' in the sense OP intended.

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I interpreted the analogy very differently.

Let's say someone ran a service which spun up Windows Virtual Machines, of any model, which were not genuine licenses, for the sake of "security research." Legal?

Here, I see "someone" as a security researcher, not someone who is reselling the VMs. The OP may have meant someone spinning them up to resell them to security researchers, but, given the ambiguity, I do think it's important to point out that you can spin up free Windows VMs for research purposes--you are explicitly licensed to do so.

If the analogy is taken literally, then the answer is: yes, it's legal as long as you're not reselling them.

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