I thought there was a case that "virtual" images were already legal. Does that not apply here because real images are used as the training dataset or something?

I thought there was a case that "virtual" images were already legal. Does that not apply here because real images are used as the training dataset or something? If no illegal images are used as input, I don't see how the output could be (or should be) illegal. There's no nexus to any real person being harmed.