Well, if I saw an instance serving child sexual-abuse material (CSAM)¹, I would report it to NCMEC and possibly also the ISP where that instance was hosted. I expect that this would lead to it being taken down by the ISP or by law enforcement.
I think a lot of other users would do the same. We might also message our home instance admins and suggest defederating from that instance; but this is secondary.
However, if I saw an instance serving (say) torrent links for pirated movies, I would not feel any need to do anything about it. The copyright industries can pay for their own enforcement.
¹ By "CSAM" I mean material involving the sexual abuse of an actual child; not fictional stories or drawings. Y'all loli/shota manga fans may be perverts but you're not molesters, and your stuff is not illegal where I live.