Yes, you are right, this is exactly the problem. Instagram just published an official response (emphasis added):
Ownership Rights Instagram users own their content and Instagram does not claim any ownership rights over your photos. Nothing about this has changed. We respect that there are creative artists and hobbyists alike that pour their heart into creating beautiful photos, and we respect that your photos are your photos. Period. http://blog.instagram.com/post/38252135408/thank-you-and-were-listening
This is just lying by omission. The copyright license HAS CHANGED significantly. See the diff, https://www.docracy.com/doc/diff?revisedId=0a13ikph1yc&originalId=44z2az188p
Look at the former section
"Proprietary Rights in Content on Instagram"
Instagram does NOT claim ANY ownership rights in the text, files, images, photos, video, sounds, musical works, works of authorship, applications, or any other materials (collectively, "Content") that you post on or through the Instagram Services. By displaying or publishing ("posting") any Content on or through the Instagram Services, you hereby grant to Instagram a non-exclusive, fully paid and royalty-free, worldwide, limited license to use, modify, delete from, add to, publicly perform, publicly display, reproduce and translate such Content, including without limitation distributing part or all of the Site in any media formats through any media channels, except Content not shared publicly ("private") will not be distributed outside the Instagram Services.
This section about copyright has turned into something pretty much like Facebook's:
Instagram does not claim ownership of any Content that you post on or through the Service. Instead, you hereby grant to Instagram a non-exclusive, fully paid and royalty-free, transferable, sub-licensable, worldwide license to use
If you give someone a copyright license and grand them the rights to transfer or grant licenses themselves, it's a very broad license. There's no reason why Instagram couldn't transfer the rights over your pictures to other businesses like Facebook or anybody else, without having to ask your permission (you already gave them!) So of course that includes making money with it (money that you will never see, even though it is your pictures).
The solution: http://instaport.me
I hope it helps to clarify some of the nonsense that I have read on the Web.