Yeah that was it; if I got this right, US libraries got the right to lend out one digital version of a book that they had in their inventory. Archive.org combined those digital versions so that people could check out a digital book if any library in the US had it (digitally) available. But during the 'rona they removed this limit and just lent out books regardless of it being "checked out" digitally from a library.

This wasn't a very smart move of them. I get why they did it but they put themselves at a huge legal risk.