So, it's happened again.
If you're newish and not familiar with this concept, then check out this Wiki page on the concept itself and this Wiki page on some of the moderator theory behind it.
I'd like to revisit this and try to develop a consensus on what should happen in the case of Happily Ever After situations, since this has always been a "fear" of mine as a moderator. While I've long since determined how I would handle the situation, I have a feeling that many people would disagree with my method.
My thoughts on the matter are that both sides should lose, and this stems from the win conditions as I write them. My "standard" win conditions for town and scum are something to the effect of:
Town: You win when no threats to the town remain.
Scum: You win when you are the only remaining faction, or nothing can prevent this from happening.
If both sides remain at the end, then there are still threats to the town AND scum is not the only remaining faction, so they both have failed to achieve their win conditions as I've written them. This also makes the most sense flavor-wise, to me. It isn't really happily ever after if both sides are constantly living under threat of the other side initiating a kill again. It has the additional benefit that it would make it playing against your win condition if you were to intentionally allow a "Happily Ever After" situation to occur, which is a good side effect in my opinion. These scenarios aren't satisfying to anyone (moderator or players), so they should be discouraged.
Another option that is somewhat appealing to me, although not as much, is the idea that the side who initiated the "No lynch/no kill" cycle is required to break it or lose, while the other side wins. This at least puts the onus on the side that initiated the cycle rather than having a set rule on "X faction loses in this scenario".