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It's been the most stable way for ages, and at most they'll just ban the account. Either way I don't know of anyone getting banned bc of this exact version. Maybe if you chat with spotify support and admit it they'll care, but I highly doubt it's illegal to block ad requests (or telemetry), adblock isn't illegal and it's no different to that.
Regarding my IP - every website I ever visited already knows it. If you're not on static IP it's insanely easy to change, rendering an IP ban useless.
edit: to make it simpler - there is no law that says you have to accept requests from an ad server, just like there is no law forbidding you from blocking them. And breaking ToS isn't illegal by itself, at least over here.
I wonder how deeply integrated the ads are. Can a PiHole stop them?
Should be able to. Web players + adblock used to be a foolproof solution, I didn't keep up with it though. I guess they could get some podcast ads and a few banners in.
Love my pinhole but it can't stop YT ads