There could also be trademark disputes, which is a little bit different. I don't imagine that Apple would register apple.badass, but would likely get upset if someone else did.
I guess in that case the (claimed) trademark owner would have to sue the (claimed) trademark infringer directly, rather than using the domain registrar as a sort of deep-pocketed extrajudicial enforcement mechanism. I don't necessarily see this as a bad thing. That's what courts are for.
The same is true of straightforward ownership disputes, too.
We don't expect (e.g.) gas stations to be responsible for monitoring for stolen cars and refusing to sell them gas.
Cryptocurrency is unforgiving in the face of human errors and issues (like disputes over ownership). It was designed without this by choice, so it should be no surprise that a domain system based on it would have the same unfortunate properties.
Mike Carson is up to all kinds of interesting stuff in the domain space.