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It is not where you live, or where you host. It is as kimmykim said - where you sell. If one customer from that state visits your site - they COULD go after you.
It depends on the law, but they have done so hundreds of times in consumer protection cases. Of course, you may have a defense, and that law may be tailored to certain jurisdictions. I was going to get into wine investing and selling on eBay, but this was impossible - as I had to be concerned with the laws of the state I was selling stuff to.
eBay eventually banned the sale of wine on their site for this reason.
States will often go after companies in other states under their consumer protection laws. They do not bother to do so in many obsenity cases, as it is much more complicated and there are 1st ammendment issues as well as they know that the ACLU will step in to defend such cases.
It takes a prosecutor with a lot of extra time on their hand to do it, and they can, but why should they - when they can go after people like Ms. Cleo and such.
They most likely would only go after people in their own state, because it eliminates a whole bunch of legal sticky stuff, but they can do it if they want to.
If you live in the US or are a citizen of the US - they can come after you. People tried to get out of internet gambling prosecutions by moving everything out of the US - including themselves. The US had no problem in arresting them. The US seems to have given up on internet gambling for the meantime.
I really do not think you have much to worry about. The police, FBI, and others know about tons of illegal stuff they NEVER prosecute. In almost EVERY drug case, they COULD prosecute you for tax evasion. They do not 99.9% of the time. If you are not doing something that that agency is currently working on - they do not care. I had a friend arrested by the secret service for a tiny bank scheme he pulled. When they arrested him, there was thousands of dollars in drugs in the room. They simply flushed it down the toilet. He could have done much more time for the drugs then he would have for the Bank Scheme (11 months for $70k he didn't even have to pay back). Why, because they weren't looking for drugs. It isn't worth the paperwork they would have to fill out.
Unless the police in some state - make this a priority - they are not going to go after you. I would even be willing to bet you could walk into the police stations of 99% of these hostile states with pictures of your "obscene" sites, and they would send you home. They do not care most of the time. Cops do not like to prosecute crimes they aren't familiar with - and 99% of them have never worked on such a case.
Now if you really piss off the police - they can prosecute you for everything under the sun, but usually they won't.
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