The biggest legal risk, empirically, is massive copyright lawsuits. The AI art models are rapidly eliminating most artist/photography jobs.

Revenge porn and CSAM are trivially solved by community moderation methods like Midjourney, simply force every generation to be tied to a paid account, and made in the public eye (posted on discord channels).

So in reality, its not Google's risk conservatism, its Google's utter lack of imagination and creativity, and the lack of organisational incentive for anything other than ad money.