> There's a system set up to determine what rules are necessary
See "regulatory capture", and all the other ways that system can be broken or exploited. Also see the long history of how regulations written for yesterday's technologies work badly on today's and completely prevent tomorrow's from being created.
I'm extremely skeptical that this particular issue could have been effectively fixed another way, because I've seen what the proposed "solutions" looked like that "played by the rules".
> Your standard seems to be that a service should be legal if two or more people agree on a contract("providing a service people want and thus want to pay for").
No, that's not the completely general standard I'd advocate, though that would still come a lot closer to reasonable. A general standard would also internalize any externalities (and any parties affected by them) before evaluating that metric. (Though keep in mind that "reduces the demand for a competing service" is not an externality.) Overall, though, a world in which individual consent always wins would be better.
(We'd be better off still with a world where one of the providers of those services wasn't also, unrelatedly, engaged in various unethical behaviors such as discrimination.)
In any case, I'm not interested in turning this into a general evaluation of structures and approaches to regulation and government, not least of which because that would retread well-trodden conversational territory with little new to cover.
I think it's worth focusing on the specific case of "is the world better or worse off" here, and then asking how, if you see the specific path taken as a problem, the same goal could have been achieved in another way.
> to allow people to survive without doing an incredible amount of research into everything they consume
You shouldn't have to do 100% of the research yourself, but I think you should have a choice of who you delegate that responsibility and trust to.