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Cloudflare can assign IPs based off customer reputation. High risk customers get high risk IPs. This way legitimate businesses stay on IPs that don't get blacklisted and sketchier businesses go on high risk IPs before they potentially get banned.

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They already do this. Free tier IPs are separate from Pro tier, Enterprise tier, etc.

They must not be doing a good enough job if legitimate sites are being taken out by these blocks too.

Almost all of their customers are using the free, high-risk tier, because it's free.

Free users and being high risk is not the same thing. There are many many low risk free customers.

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