However the downside of this faith technology and markets is that many people who don't have the capital/know-how to stay ahead of that are going to get crushed under the legal steamroller in the meantime, and police and prosecutors have a habit fo going after easy targets and relying on popular prejudice to get away with it. Nobody in the sex work community is in favor of human trafficking, and it's a real thing that should definitely be curtailed. But curtailing organized crime takes a lot of diligent effort, so what often happens is that legislators broaden the definition of crime and then law enforcement sweeps up marginalized people to make quotas that support budget requests.
My SW friends tell this has been a perennial problem and also have harsh words for the 'nonprofit industrial complex' which vacuums up a lot of grant money but requires a steady supply of victims to assist in order to maintain their cash flow. Naturally that sector lobbies government, and so do sex workers, but since sex workers often find themselves in a legal grey area to start with any sort of political organizing on their part actually exposes them to greater liability.
When the established, deep-pocketed players start making these kinds of decisions out of fear of prosecution, how is this going to effect the small/new players? New communities won't be able to effectively monitor and filter their content, and won't have the resources to defend themselves in court. At best "that stuff" will move to sketchy and ephemeral locations similar to file sharing "pirate" sties. At worse your web 3.0 will consist of nothing but "PG, corporate sanctioned mass market internet".
The new communities are subject to the same law.
The problem is that the economics of complying with this are entirely impractical. The only choices are to go bankrupt trying to comply, shut down the service preemptively, or not comply. The big services know that so they're shutting down.
The question is how aggressive prosecutors will be about enforcement.
If they're lax then communities will proliferate but they'll all be subject to destruction at any time because they're breaking the law. So everyone is living in the dystopian Soviet hell where there is no rule of law, there are only the whims of government bureaucrats, and all the chilling effects and self-censorship that comes with it. And entire communities will periodically be wiped out essentially at random.
Whereas if enforcement is vigorous then the communities will exist because they'll get better at evading law enforcement by improving security, hosting in other countries, etc. You end up driving evolution to a level of lawlessness that nobody wants -- open murder markets etc.
There is no scenario where this can end well, other than repeal.