Mind you, this is only one of the basic cases. There are plenty of other use-cases for such a service that does not even involve copyright abuse. Imagine an indie label that sets up an instance to promote their artists. Or a music school that puts performance from their teachers/students.
There are plenty of ethical reasons for something like Funkwhale to exist, it's not on the developers to ensure that it is only going to be used in a way that doesn't cause the ire of the big-baddie RIAA.
That's basically music.
Questions of copying, design, originality, costing and ownership become more detailed, complicated, and fractious, the nearer you move the conversation toward to code.
That probably explains why they never use DRM-based app stores like those from Apple, Valve, Epic, Sony, etc..
So some things that come with caveats are worth investing in. And there is some good in the majors. Throwing out the bad without the baby is the tricky part.