Ah, sorry, this will seem like an odd first post, but this is actually a topic I know quite a bit about!
First of all, hello! Long time lurker, first time poster. A little back story about myself is before becoming an MFC model, I was a former pornographer, as well as an adult website designer. I still dabble in design from time to time as well.
Now, MFC is a porn site, despite their little "we're not a porn site" junk they have plastered all over their Wiki. Case in point is the 2257 record keeping notice at the bottom of their site. Any website catered to the American audience is required by law to have this notice if it features any sexual nudity.
To summarize, the 18 U.S.C. 2257 Record-Keeping Compliance Statement is basically the government's way of forcing site owners to verify the age of anyone appearing in adult themes. By requiring someone within the company/site to maintain the title of "Custodian of Records", the Feds know whose door to bust in when they want to check a model's age. Hence the reason upon signing up with sites such as MFC, you are required to supply two proofs of identification, both clearly showing your date of birth, and at least one with a photo.
As most pornographers will tell you (especially those working overseas), it's a bunch of bullcrap in how it is implemented. But, that is a rant for another day!
Anywho, just because of that notice, MFC is blocked as an adult site through most parental controls. If it isn't, it's the fault of the parent and parental controls, not MFC. That aside... public nudity, fucking, masturbation, etc. are not illegal to present on the front page. Just look at tube sites, modern porn sites and all the like. You'll find vagina, penis and jizz all over the place.
MFC's reason for including these as rules has nothing to do with the legality of it. It is more or less just a business decision and (more reasonably) a way to encourage a community. Rather than just paying to see people diddle their naughty bits, you spend a great deal more time getting to know the model and thereby becoming more emotionally invested into the site. Sites like Skinvideo do not have to have those kinds of notices all the same, nor do they have to have rules implying no public sex.
TL;DR - MFC is a porn site. It's perfectly legal to have sex/masturbate on cam, it's just a business choice to avoid it.