Last year, I created a 100% FOSS "startup." The idea was to "fight" Cloudflare. I developed the bot detectors myself, most of the services, and also the entire proxy engine and DNS. In MVP, I hired a former CloudFlare developer, and he helped me with the final adjustments. I pitched to some VC in America and Europe, I even managed to get two investments (one of $50,000 and another of $180,000). The money was more than enough to pay the programmer I hired and the infrastructure costs. The project was 100% open source, with the source code available for anyone to scrutinize.
The biggest problem was the legal aspect of the business. I had a horrible experience with a European firm, spending $60,000 to "legalize" the startup, and it simply didn't amount to anything. To this day, they haven't gotten back to me, and yes, I sued the firm, but these things take time. In America, I had a different problem: absolutely no law firm wanted to take my case. In meetings with lawyers, they said that legalizing this type of project is basically impossible simply because it involves working with PII and network-level telemetry. So, obviously, I played the Cloudflare card, if they could do it, then anyone should be able to too. But that's the problem. Cloudflare wasn't created by someone like me, an outsider, but by someone with strong connections to the American government. Even today, Cloudflare doesn't face any compliance issues despite the nature of their business. But anyone who wants to do the same will face a ton of legal bureaucracy that makes the business simply unviable.

I genuinely hate Cloudflare, but I hate even more the governments that allow this satanic entity to exist. I tried, I did everything I could, I spent my money and investors' money, but the fight seems completely lost. I genuinely don't know what else to do. The money I received from VCs basically ran out, and I couldn't legalize this mess. It's amazing how nobody questions the legal merit of Cloudflare.

What are the legal issues, exactly?