Doood. Links farms are not like email spam. Spam itself is not a problem, it’s the costly (to recipients) activity that spammers engage in that is a problem.
Consider a junk fax for example. When someone spams your fax machine they are sending you an unsolicited message on which the costs are being placed on the recipient. The person who owns the fax machine has to pay for the paper and the ink. Email spam is much the same because of the sheer amount of spam that gets sent out. Email providers have to spend a significant chunk of money paying for the bandwidth that spam uses as well as resources to filter it out.
In contrast, a spammy website at rest is a platform which is totally paid for by the spammer. The spammer could cause problems which could be illegal by massively sending out trackbacks, pings, social networking submissions and other things but that still doesn’t make the domain itself illegal.
I’m not a lawyer though and I haven’t done extensive research on the subject.
I think the free market works just fine. I would rather pay a squatter $1000 for a domain and register it each year at $10 / year than pick up a domain for $100 and have to spend that again each year. The free market sets real prices. The less regulations and intervention from government the better. Especially in the area of technology. The government screws up enough things in the area of technology, lets leave them out of the are of domains as much as possible. 😉