I wouldn’t be so quick to say it’s legal because google image search is legal. Image search is legal because “thumbnails” and “image search” were decided by the court to be sufficiently transformative and in a different marketplace from “images.”
I could very easily see it being argued that “computer generated images” are in the exact same marketplace as “images” so already that case wouldn’t apply and new legal reasoning would be needed.
Legal departments are employed to tell you about legal risks, not to predict the future. Your corporate lawyer isn’t going to go “yeah that’s illegal but it’s totally awesome bro”. The execs might but not the lawyer.
In this case, the riskiest issue isn’t copyright, it’s that it can generate NSFW/CSAM, which governments and payment processors both get really upset about.
It’s not about predicting the future. The point of communicating legal risks is to make assessments about which risks might be worth taking because complying with every single law is impractical.
It’s part of the basic structures where the legal team has an advisory role.
It’s factual in much the same way the average person breaks multiple laws as written every day.
Much of this is simple ignorance and many thing aren’t particularly relevant. 14 states still had sodomy laws in 2003 when the Supreme Court reversed its stance and declared them unconstitutional. At this point there are hundreds of years of crap at the federal, state, and local level much of which changes based on where you happen to be.
What percentage of the US laws have you actually read?
I see two ways of interpreting "companies break the law constantly".
One, that there is always a company out there somewhere acting criminally. If that's the intended meaning, it is a factual statement, but doesn't not carry the original implication that companies do not try to avoid breaking the law. For instance, the fact that there is always a human out their somewhere committing crime doesn't not mean most humans do not actively avoid such.
Two, that any given company breaks the law often. This carries the implication that companies do not worry about breaking the law, but is also factually incorrect.
(It’s legal the same way Google Image Search is.)