And you overestimate the amount of bullshit the average instance admin is willing to put up with. Sure there will be a few instances who can afford lawyers, offshore servers, whatever. But the majority are hobbyists who think this whole fediverse thing is neat as long as it costs a few bucks for an off the shelf web host and a bit of free time to moderate. And if those people get legal threats, they will either comply or get out because running an instance with 100 users is just not worth the risk of ruining your life.

The fediverse wouldn't die completely but it would for sure lose many smaller instances. We've already lost larger ones like lemm.ee for less.