It should be illegal, but it's not getting shutdown because it's basically diverting the responsibility of the pictures.
From the site:
Content Produced by Third Parties: The operators of pinkmeth.net are not the “producers” of any depictions of any actual or simulated sexually explicit conduct. To the extent that any such content appears on this site, the operators’ involvement with respect there to is limited to the transmission, storage, retrieval, hosting and/or formatting of depictions posted by third party users, on areas of the website under the users’ control. pinkmeth.net submitters, the third party “producers” of actual or simulated sexually explicit conduct, are responsible for maintaining the age verification documentation required by Title 18 U.S.C.
It maintains that the site itself is not a producer, that 3rd parties are the responsible parties who produces these images, and they are to be held liable. They submit that they are simply a vessel for transferring, storage, hosting, and viewing of these images.
Kinda like the torrent sites saying they are not responsible for the pirated movies, it's the users who upload them.
Not sure what I think about this..