Instagram can sublicense your public posts
Who would have thought that you should read the terms of service for Instagram? Apparently not Stephanie Sinclair (see Sinclair v. Ziff Davis, LLC et al, Case 18-cv-790, S.D.N.Y., Dkt 31, copy hosted on Mega.nz).
Ms. Sinclair posted a photograph to her Instagram account that was set to public. Ziff Davis owned Mashable attempted to get a license from Ms. Sinclair to use that image. She did not accept their offer. Mashable then embedded the image using the Instagram API in their story. Ms. Sinclair was not amused and sued. The Court just dismissed her copyright complaint.
Thus, when an Instagram user uploads a "public" image to Instagram, they are licensing Instagram to use the image, and they are giving Instagram the right to sublicense the use of the image to third-parties.
You should read the terms of service, even if no one else does (see Business Insider story).