I don't know if they explicitly allowed it, it seems more likely the CD code was only checked locally so there wasn't much the game could do to stop code sharing.
For instance, the Diablo CD, it could be installed either as "full" or "multiplayer", if you had the multiplayer install, you could only join games, but not start a single or multiplayer yourself. It was very cool.
This isn't true. Yes, it's only checked locally, but you can store the key-code used and if you connect to another player with the same keycode it can prevent you from playing together. This is something many companies did to their games. But many others didn't, and they were treasured for LAN parties.