In all honesty, there are a ton of us tech enthusiasts who have no problem paying 10-20$ per month to run an instance out of our own pockets. We get the ability to subscribe to content we used to use Reddit for, and we can have a few folks hop on with us. Multiply that by a bunch, and add in community funded instances, and we’ll be fine.
Gotta consider server costs were only a fraction of Reddit’s costs. Salaries are quite pricey, and we have lots of folks volunteering time which will make it all work.
Generally, if in the same country you’d have to comply. As another example though: If your server was in Canada, and some department in Alabama wanted your data, you could tell them to pound sand. Though they may put some sort of warrant out for you for failure to comply (doesn’t matter though if you never go there)