It is a bit incoherent, but it's also... provably compliant in a scorched-earth kinda way?

What are the alternatives?

A regulator saying no? Easy, your headquarters has just moved the Cayman Islands, Ireland, or Switzerland... the US office is just a subsidiary leasing the brand IP and doing marketing.

Or, you just ignore the regulator behind closed doors because you're part of some black budget. You wouldn't be able to talk about that closet back there even if it did exist.

Or, you don't do any of these complicated loopholes and you simply move all the training and inference to a different jurisdiction.

If the only winning move is not to play, how do you ensure everyone stops playing?

Simple: you must destroy the game.

It does have a kind of mad logic to it.

(That is a bit dramatic, but the idea is if we accept that AI research will happen wherever there is capital available, instead of restricting the research you restrict the return that capital can earn. And the only provable/market way of doing that is to require the results to be open. In other words, if the benefits of getting all that cash to buy GPU's gets handed out to everyone for free, then there will be far less cash floating around to buy GPUs, slowing down the process)

Or you are China's Communist Party. You download the weights and use them as the starting point for your closed-everything AGI with Chinese characteristics while the US ensures that everyone else stops playing.

i mean there is the whole capitalism problem to contend with in terms of getting support from congress ... but gotta admit, it has that "it's so crazy it just might work" feel to me too