It seems to be only against ToS; the problem, however, is that “distillation” involves intent. Anthropic seems to be calling for ban on distillation because they cannot reliably identify who does it - if they could, they would’ve just banned all infringing users.

However, if there is no systematic difference between regular use and “distillation use” then they need to establish intent, which is laughably hard if you cannot even distinguish use cases.

Hence the call to make it illegal too (and just against ToS). Because if it is illegal, then they can rely on US to enforce the law. And the US, for a lack of technical solution, can use the good old “China bad” shortcut.