But broadly the courts have upheld the rights of companies to use copyrighted works as inputs to commercial algorithmic derivative works like neural networks.
Now you might argue this doesn't apply here. A key aspect of the decision rested on the fact that the original copyright holders (book authors & publishers) were not directly harmed by Google's indexing of them, since it probably drove more sales of those books. In this case it's not so clear. Is somebody using a diffusion model doing so instead of buying a piece of commercial art? If they're generating a new piece of art, I'd say probably not. But if they're generating something specifically similar to an existing specific piece of art, perhaps, but if it's deliberately different, it's still a tough argument. If the ML model is being used to deliberately replicate a specific artist's style, then I think you can make that case pretty strongly. But if you're building something that's an aggregate of a bunch of styles (almost always the case unless you specifically prompt it otherwise) then I don't think the courts would find that any damage has been done, and thus nobody taking this to court would have standing.
I think it's likely we will see this end up in the courts somehow. But being able to prove actual harm is critical to the US court system. And it's difficult to see how the courts would rule against the kinds of broad general use that is most common for this kind of generative art.