The blocks are supposed to be used for individual pages, not the domain. https://www.iwf.org.uk/become-a-member/services-for-members/...
In the past the IWF could only take action when an image was reported to them. Recent changes (2013) mean they are now allowed to search out this content.
Those blocks should take the form of "splash pages" warning that the content is illegal. Some of the splash pages provide links to charities working with potential offenders to reduce their likelihood of offending. https://www.gov.uk/government/news/tackling-illegal-images-n...
But Interpol has a list of "worst of" content where the domain is expected to be blocked: https://www.interpol.int/Crime-areas/Crimes-against-children...
Together this means that a site that has images of child sexual abuse, and which does nothing to proactively stop that content, is likely to face increasing levels of regulations. It's also a pretty poor look for advertisers. I'm not saying that Tumblr's response makes any technical sense. I am saying that it makes sense from a business perspective.
