This reminds me of all those fan-game projects that sit in a comfortable legal grey area until someone decides to put everything up on Steam and move things from "maybe legal" to "definitely not legal."

When IA were still tying their digital lending to physical copies of individual books, they might have had a slim chance in court. Once they allowed for unlimited lending - regardless of their motivation for it - this chance evaporated.

From an ethical perspective... It's messy. Arguably, archiving out-of-print books from the 60s is probably a good thing. However, distributing unlimited digital copies of an active author's book from the 2010s is somewhat less defensible. If we have a situation somewhere in the middle, who the hell knows?