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Because the FAQ straight-up says that, if someone playing one of your shared games is banned for cheating; You will be banned as well.
Here it is:
What happens if my brother gets banned for cheating while playing my game?
If a family member gets banned for cheating while playing your copy of a game, you (the game owner) will also be banned in that game. Other family members are not impacted.
Link to the FAQ:
https://steamcommunity.com/games/593110/announcements/detail/4149575031735702629
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Edit: As pointed out below; Free games are not family-shared since anyone can play them, so this only applies to paid games.
Bans don't share after the infraction occurred and...
https://steamcommunity.com/groups/steamfamilies/discussions/0/7204143093508096647/#c7204143093508110549
Sure.
It could impact Trust and then again, it might not.
But can you trust your friend to not cheat again and while you are sharing? That's the question you need to ask yourself.
The old Steam Family Sharing, sure.
The new Steam Families beta, no.
They need to log into your PC with their account and authorize the device and vice versa with their PC and your account, yes.
Old Sharing sucks when it comes to device authorization. New Families does away with that completely but with the added "same Steam Store Country" restriction.
Yup!
I would never share a game with a friend who was banned for cheating. You will just end up banned when he does it again, and he will.