Your Community Guidelines are in direct contradiction to your Terms of Service:
13.2. Prohibited Conduct.
By using the Platform, you agree not to:
d. Post, upload, or distribute any User Content or other content that is unlawful, defamatory, libelous, inaccurate, or that a reasonable person could deem to be objectionable, profane, indecent, pornographic, harassing, threatening, embarrassing, hateful, or otherwise inappropriate;
Your Terms of Service do not have a clause protecting behavior in Private instances, nor does it make exceptions in cases of mutual consent. In fact, there is no mitigating clause at all: By your own terms, all content that is “objectionable, profane, indecent, pornographic” etc. is forbidden (“you agree not to…”) and we must agree to never show it to anybody (“post, upload, or distribute…”).
So please stop lying to people about the wrongful fact that private instances or private behavior is somehow protected or shielded from moderation. It is not. And in fact, you yourself have stated that you make no exceptions for reports coming from private instances.
Just come clean and say how things really are: Any and all sexual content is forbidden on VRChat, everywhere, all the time, and anybody can catch a ban for it anywhere, all the time, regardlesss of whether they’re in a private or public setting, regardless of their intent, regardless of other parties’ consent. AND YOUR MODERATION TEAM CAN AND WILL ACT UPON THIS FACTUAL STATE OF YOUR RULES.