I have seen a couple of articles on this subject, and it does raise a number of interesting questions about what makes something ethical or unethical, or what should be criminal. Dog fighting raises some of the same issues. The Norwegians certainly are not Puritanical about sex, but they do not seem to all that happy about it, either.
(A little elaboration: A crime seems to demand a victim, someone who is harmed. In the case of either animal bordellos or dog fighting, there are at least four possibilities. (I think at one time I could think of five, but I do not now remember what that fifth one was.)
1. The person doing the action is harmed. This is an Aristotelian argument that some actions deform or coarsen us, making us less than what we should be.
2. The animal is the victim. This is the animal-rights argument, that animal preferences should matter, as do human preferences. There are some philosophers who want to give at least some animals the same rights as humans. How far do you want to push this argument? Should I kill the mosquito that is biting me? Should I worry that driving a car often kills small animals and huge numbers of insects?
3. Third parties are injured. One possibility is that we do not want as neighbors those who are coarsened by mistreating animals. It makes the entire society less desirable in which to live. Another possibility is that just the knowledge that people are having sex with animals or having dogs fight is very upsetting, and thus it causes harm to those who are upset. Both of these are externality arguments and many or most economists would find some variant of them more persuasive than either 1 or 2.
What do you think?)
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