It would be good to have the pre-prints on arXiv labelled retracted if they actually are (I don’t know for sure if they do or not), but it is for pre-prints and something anyone can upload to even if it hasn’t been accepted by a journal yet. So it can be used responsibly as long as the person looking at the papers knows that there is no quality control, and people can upload anything. Since, usually only academics really go there much, and its original purpose was a loophole to get around paywalling of journals. And that same loophole can get uncensored versions of these articles out there for people to read.

So, while it does have this opening for abuse, since mostly academics use it I wouldn’t say that it is bad at the moment. So far it hasn’t been a significant channel for much misinformation since most misinformation is through Youtube, Facebook, etc. posts rather than people citing bad pre-prints. And I am even saying this as a physicist which, maybe it is just the filter of my own experience, but I think is the field of science that has the most cranks publishing their own theories to arXiv, such as “the new theory of super-gravity that shows dark matter isn’t real” or “why quantum mechanics proves conscious beings have souls”.