Is Grooveshark Legal? Apparently Yes, But It's Complicated.

Grooveshark, a free streaming music web application, has an interesting legal spin in its terms of service. The entire database is user-uploaded and, as such, the company cannot be held liable for the copyrights which may potentially be abused. In fact, one of the main, unique tenets behind the monetization of Grooveshark is that of making money for the users who own the original song. In other words, if you own Beatles--Yellow Submarine and upload to the site whereby some other user purchases that song from Grooveshark, you get compensated.

Eric, a friend of mine from college wrote on my Facebook wall
"I don't understand how Grooveshark can possibly be legal. It's awfully cool, though."
Here's what I wrote back:

Yeah, me neither. It doesn't make any sense to me even if they're not hosting the music. Apparently they cannot be held liable for copyright infringement because all music is stored on members' computers (like p2p). It's TOS states that members are liable. So I guess as long as we just listen and don't upload we should be fine. It's still a shady operation though.

Will Grooveshark go the way of Muxtape (that is, getting shut down by the RIAA)?

Here's a bit more on the legality of Grooveshark, here.