I guess the problem from an idealistic standpoint is fine, let them sue. Hosting an instance is not about being profitable. Do what you need to do as far as shell corporation and all that to protect your personal finances, or just close the instance instead of censoring. The community is just people who will find another instance, it’s not empowering to treat people like they will fall apart if you don’t submit to hegemony.

Now, it’s just an instance that is perpetuating unfair systems of power, instance of helping to democratize the internet.