E2e opens a bit of a problem for reporting the issue though, no? Only those that can decrypt messages can report them, and if the message isn't hosted on a server but merely routed through one in ciphertext, there's not much the company needs to do because they don't host the content anyway.

Exactly, the concern is that a judge could say e2ee thwarts proper compliance with the law and that it is therefore not legal for services with images and video.