In sia traffic is not free. No one sharing illigal movies or games will be willing to pay for the traffic generated by leechers. (Probably not even for the storage).
So as long as there will be no business modell like the one-click-hosters, where the downloader is lured into paying for faster downloads (and the uploader gets a share of the earnings), there should be no problem.
Additionally it would be nice if the hoster can decide if he allows shared contend on his storage.
If I understand it correctly, using .sia results in the "leecher" paying for the download fee.
Also you vastly over estimate the cost of bandwidth and storage. While renters get to set their pricing, it's still dirt cheap. Pennies/GB for most renters. The price of storage is $2/TB per month per redundancy. That's insanely cheap. Much cheaper than a seedbox.
As for allowing shared content? How is the hosting software supposed to determine when it's being shared? What happens if I'm restoring my backup on a new computer with a fresh wallet? I would be considered a separate person, but still need access to the files.
This is a fascinating thread, and really something that needs consideration (IMHO).
It has been considered, for years now.
Could, say, China block access to the Sia network if they needed to
Sure, block the traffic, the ports, the ips. The full list of all host nodes are presented clearly in the client.
could a legal ruling in the US enforce a take down of specific hosted content, etc?
They could only go after the hosts, not the sia platform.