How will Lemmy handle illegal content like drug dealing, child porn, snuff movies etc? On Reddit, the corporation is accountable so they will make an effort to ensure non of this exists on their platform. And they would face legal troubles if they failed to act.
But as Lemmy is decentralised this isn’t really possible. Sure the main instances can defederate from bad instances, but those instances could still operate and be accessible on the web. Especially if they’re hosted in countries outside of the western sphere of influence. Multiple bad instances could federate and duplicate the illegal content pretty easily, making it difficult for the authorities to keep it shut down. Has this been thought about already?
Each Fediverse instance is just a server running software (I.e. Lemmy, Kbin) that uses the ActivityPub protocol to communicate with other instances.
There is no central authority, that’s kinda the whole point of being federated and decentralised. Each instance is it’s own website, it’s own island. It’d be like asking how “Email” or “Https” would handle illegal content. It doesn’t, it’s up to the hosts themselves to do so.
On a fundemental level, each instance is just a website, so an illegal instance would be tracked down and prosecuted in the same way as any other website/forum doing illegal stuff.
Best you can do is encourage your instance’s admin to defederate from those illegal instances if they haven’t already. Let the authorities handle the rest.