Yes, just like even if it's just you and your bakery, you still have to follow a bunch of health and food safety regulations, as you're providing something people can be harmed by.
I don't think it's so out of this world to require similar things for platforms and services available to the public on the internet. Although I wouldn't maybe say it should be straight up illegal, I wouldn't mind more research and understanding of how we could prevent the biggest harms, without infringing on what people do in private. But then is a self-hosted Mastodon instance connected to the public internet and other instances in public or in private? Personally I'd lean towards the first.
Revenue exceeds 0.1% of US GDP or market share exceeds 10% of their own market.