Why has SoundCloud not been shut down by the RIAA for promoting piracy?

Soundcloud and piracy - there is an exception which has protected it up to this point. However what the future will hold for its users and what will be considered allowable downloadable content is unclear...

(May 2011, Hartley Brody)
When the Digital Millennium Copyright Act was passed in 1996, there was a provision inserted which is known as the "Safe Harbor" clause.

Legislators recognized that there are many large internet services that allow for the storage of user-uploaded content (YouTube, SoundCloud, MediaFire, etc.) and that these services would face an impossibly difficult game of cat-and-mouse if they would be liable for any infringing content that a user uploaded to their service. They'd essentially have to shut down to ensure nothing illegal was ever uploaded to their servers. This would stifle innovation on the internet and "chill" free speech.

The safe harbor clause addresses that by saying, "Look, we understand users might try to upload material that they don't have rights to, and it's not really fair to penalize you for the actions of your users, even though the infringing content is now sitting on your servers..."

The safe harbor clause proscribes a series of steps that services must follow in order to qualify for the safe harbor provision. As long as the service follows these steps, they're immune from any litigation due to any infringing content on their servers.

In a nutshell, the services must:

• designate and publicize an agent to handle all DMCA take-down requests
• remove any infringing content (almost) immediately upon receiving a take-down request
• institute a "repeat infringer" policy to track and remove users who continually receive take-down requests

This places a strong incentive on the services to respond quickly to all take-down requests, otherwise they risk losing their "safe harbor" status and they suddenly become liable for all of the content on their servers.

From personal experience as a music blogger, SoundCloud is very proactive in responding to take-down requests, even to the point of taking things down that aren't actually infringing, just in case. It sucked for me as a user sometimes, but I know they were doing it to keep their "safe harbor" status and protect themselves from the RIAA.

They've even gone so far as to scan all newly uploaded tracks and look for waveform matches with millions of songs in a huge database of protected content. Now, if you try uploading a song that's too similar to an RIAA-protected one, SoundCloud might automatically reject the upload, without even receiving a take-down request. This has become a little controversial, since many legitimate remixes and samples are being blocked, but SoundCloud is doing it to make sure they never have to face the RIAA or any other mass-infringement lawsuit.
(http://www.quora.com/Hartley-Brody/answers/Intellectual-Property-Law)