The DALL-E replicas on hugging face are not sophisticated enough to generate credibly realistic images of the kind that would generate bad PR. I suspect the moment it becomes possible for a pedophile to request, and receive, a photorealistic image of a child being abused there will be bad PR for whatever company facilitates it. Or consider someone who wants to generate and distribute explicit photos of someone else without their permission.

Is it a legal issue? I'm not sure, though I believe that cartoon child porn is not legal in the US (or is at least a legal gray area). Regardless, I sympathize with OpenAI not wanting to enable such behavior.