Fanfic.net had its controversies too, but I think in the end it was safer for them to get rid of the NC17 stuff.
Ironically, it probably put them at MORE legal risk, not less. Fanfiction.net is simply too big to enforce posting rules; there's simply no way they can be sure no one is posting NC-17 fic under a lower rating. Had they faced a legal challenge before they performed their NC-17 purge, they might have been able to claim they were merely acting as a common carrier, and so were not responsible for the content of any specific items posted on their site. Once they perfomed their NC-17 purge, though, they created a reasonable assumption on the part of readers that stories would actually have to confirm to the site's posted ratings requirements. Now when little Johnnie's mother finds her kid reading a (mis-rated) pornfic on ff.net, she will be able to make a strong claim that ff.net is liable because they failed to enforce their own posting rules. "If I had known my kid could find porn there, I would never have allowed him to read the stories on that site. But the site says they don't allow adult stories, and I trusted them..."
If you can't enfore a rule consistently, it's better not to have it in the first place. By claiming not to allow NC-17 stories on the site, ff.net has made itself vulnerable, because it still has NC-17 fics there (and always will, so long as it allows author self-posting).
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Ironically, it probably put them at MORE legal risk, not less. Fanfiction.net is simply too big to enforce posting rules; there's simply no way they can be sure no one is posting NC-17 fic under a lower rating. Had they faced a legal challenge before they performed their NC-17 purge, they might have been able to claim they were merely acting as a common carrier, and so were not responsible for the content of any specific items posted on their site. Once they perfomed their NC-17 purge, though, they created a reasonable assumption on the part of readers that stories would actually have to confirm to the site's posted ratings requirements. Now when little Johnnie's mother finds her kid reading a (mis-rated) pornfic on ff.net, she will be able to make a strong claim that ff.net is liable because they failed to enforce their own posting rules. "If I had known my kid could find porn there, I would never have allowed him to read the stories on that site. But the site says they don't allow adult stories, and I trusted them..."
If you can't enfore a rule consistently, it's better not to have it in the first place. By claiming not to allow NC-17 stories on the site, ff.net has made itself vulnerable, because it still has NC-17 fics there (and always will, so long as it allows author self-posting).