[thomax]

I would guess that "handmade" in this context doesn't mean "no machines were involved", but rather "produced on a small scale and without processing the product in a factory".

Still, however you look at this rule, there are a lot of gray areas, and policing those must be challenging. I'd also guess that with an IPO on the horizon, the Etsy shareholders probably favor high volumes on their website, rather than kicking out shops that peddle non-handmade merch. A pity, that, because It's sorta the opposite of what Etsy was supposed to be.