The part you are missing is that airlines don't need a law that lets them overbook. They absolutely can involuntary boot anyone for any reason (other than discriminatory reasons that are otherwise illegal). Booting a person would be a breach of contract, but breaches of contracts aren't illegal.

Hell, they could update their contact and then it wouldn't even be a breach of a contract.

The law was written to reign in their behavior. Without it, they have a lot more freedom.