I don't think "technical loophole" is the best description. They were trying to make the case that they were providing a long antenna cord which is at least sorta reasonable (and something the cable companies could not claim).

Antennas are legal. Manipulating airwaves to be played on a TV is legal. Long antenna cables are legal. Putting an antenna on my neighbor's roof is legal. Paying my neighbor rent for such a thing is legal. Storing broadcast content is legal. Paying for devices to do such a thing is legal.