I feel like there's an implication here that distillation is a problem but I don't understand what you mean. I thought distillation was generating text from a model and then training another model on it. Is the something unethical in that? You're paying the API costs to generate the tokens, right?
Or I guess more to the point: is this something frontier labs have said is (or tried to paint at any rate) problematic? This feels like an "out of the loop" situation because I've only ever heard "distillation" with a positive connotation before.
Whether it's a 'problem' or not is viewpoint-dependent but it's against the OpenAI ToU:
> You may not use our Services for any illegal, harmful, or abusive activity. For example, you may not:
> [...]
> * Use Output to develop models that compete with OpenAI.
Source: https://openai.com/policies/row-terms-of-use/
(I'm also curious whether they consider developing a competing model to be illegal, or harmful, or abusive...?)