Craigslist on Wednesday filed federal suit against South Carolina Attorney General Henry McMaster, seeking to block a threatened criminal probe over adult-oriented ads served up on South Carolina Craigslist sites.

In an odd response, McMaster declared Craigslist’s suit against him a “victory,” because it showed Craigslist was taking his threats seriously.

Say, what?

Last week, Craigslist removed the erotic-services category in its U.S. classified sites, having replaced it with a new “adult” category which the company says is vetted by employees before paid ads are accepted for publication.

And true to his word, McMaster issued a statement late last week his office would launch a criminal investigation anyway, because it had not removed “advertisements for prostitution and graphic pornographic material” on the sites that serve South Carolinans. This, despite Craigslist’s changes to its policies for erotic services and adult content.

McMaster had given Craigslist a deadline of last Friday to remove the ads from South Carolina sites, or face a possible criminal probe.

“We have no alternative but to move forward with criminal investigation and potential prosecution,” McMaster had said.

“No alternative” must have meant he had to live up to his own bluster. Taking sides, many Internet law experts contend that the attorney general doesn’t have a case; that U.S. federal law protects Web hosts from prosecution for crimes allegedly committed by others using the hosts’ sites.

McMaster didn’t make clear his next move, but it appeared as though he was backing off. “… They are now taking responsibility for the content of their future advertisements,” he said. “If they keep their word, this is a victory for law enforcement and for the people of South Carolina.”

“Unfortunately, we had to inform them of possible state criminal violations concerning their past practices to produce a serious response,” he continued. “We trust they will now adhere to the higher standards they have promised.”

Craigslist CEO Jim Buckmaster has been blogging about the ordeal all week. He also explains the lawsuit.