>At this point there is no need to raid the ISP because the traffic can be traced back farther than the ISP to a more specific place.
It seems like you're still not distinguishing it from the exit node: In order to set up a wiretap, the ISP is going to know about it (it's their equipment). If the ISP employees are the criminals then getting a wiretap for the customer's IP address that they've been spoofing is going to tip them off. If you're not worried about that for the ISP then stop worrying about it for the exit node -- in which case you could do the same thing, require the exit node operator to install wiretapping software on the exit node and trace the traffic "back farther than the [exit node] to a more specific place" (i.e. the next Tor node in the chain). It still doesn't get you anything, but neither does a subpoena to the ISP that just leads you to an otherwise-clean exit node.
>Obviously running a TOR exit node, open wifi or ISP can't be a blank check to get away with crime.
People keep saying this -- it's wrong twice. First, just because you can't do a smash and grab police raid doesn't mean you can't do an investigation. Digital forensics are crap anyway -- way too easy to forge. (Criminal installs remote control software on some poor sap's PC to do dirty work, secure removes it when finished and everything ends up pointing to the sap.) Try doing some actual police work, interview suspects, look at the illicit materials to see if there are clues from the background, on and on. And after you've done your homework, if the evidence still points to the exit node operator (instead of just the exit node's IP address), then you do a raid.
But perhaps more importantly, how is it the operators of the anonymizing thing who we are worried about getting away with something? If you know enough about Tor to set up an exit node and you're a criminal, you can just use somebody else's exit node instead of setting up your own. Or hop on some public wifi, or break into some sucker's PC to use it as a proxy, etc. If the police have successful methods to catch those criminals, then use them against the criminal who hides under an exit node instead of raiding it.
And if not, well, that's life. A police state is very helpful to the police. The cost of not having a police state is that some criminals get away with it. It's the cost of doing business in a free society.
>That's obviously wrong, but it happens all the time, often totally benignly, in this case much more maliciously.
Which is why they ought to be stopped. Government malfeasance is all but universally a more serious problem than private malfeasance, because a good government can often save you from bad private actors, but almost nobody can save you from a bad government.