Very resonable (imo) response from Gargron (lead developer of Mastodon):

I’ve forwarded your question to our legal help and will provide an answer as soon as they give it to me. What you must understand is that our lawyers don’t have experience with federated platforms, and we don’t have experience with law, so we meet somewhere in the middle. Meta presumably has an in-house legal team that can really embed themselves in the problem area; our lawyers are external and pro-bono and rely on us to correctly explain the requirements and community feedback. The draft has been around for something like a year and none of the community members pointed out this issue until now. I’ll add one thing:

"My assumption, {.. shortened for brevity ..} is that when you post content it gets mirrored elsewhere, and this continues until a deletion notice is federated. So I'd assume if an instance somewhere mirrors my content they can't get in trouble for it, and I'd also assume that if there is a deletion or maybe a block and a reasonable interpretation of the protocol would say that the content should be removed, I could send them a takedown and at that point they'd have to honor it."

The goal of the terms is to make assumptions like this explicit, because assumptions are risky both sides. Just because luckily there were no frivolous lawsuits around this so far doesn’t mean there isn’t a risk of one.

Cory has had a much more calm response on a fediverse post, offering to reach out to the EFF's lawyers for assistance in drafting a better ToS for Mastodon, and other experienced lawyers have offered help also. Amongst the usual negativity from some users.

I'll be keeping my eye on the outcome but so far it looks positive.