Adobe Firefly’s interpretation of the prompt “an image from the view of a person who is being surrounded by an approaching horde of crocheted amigurumi.”

This article first ran in Craft Industry Insider, our monthly newsletter for corporations and larger businesses in the crafts industry.

As the marketplace invests in AI tools internally, junk sellers are crowding the platform.

The very first issue of the Insider newsletter looked at the potential effects of generative artificial intelligence on the creative industries. One year later, we are starting to understand better how generative AI tools can be useful and how they are disrupting the creative economy.

For example, Etsy is bullish on using AI for its own platform, using machine learning to augment its search tools and delivery date estimates, but it has yet to make a clear statement on its policy regarding selling AI-generated products in the marketplace.

AI-generated patterns on Etsy have become prevalent enough to attract the attention of NBC News and inspire a subreddit called CraftedByAI. In my own search for “crochet pattern raccoon” last week, three of the top eight results were definitely AI-generated. The especially sharp photos with questionable shadows immediately stood out, and, unlike real patterns, there were no additional photos or videos of the finished projects. Often you’d see reviews complaining about the quality, but not always.

Illustrators and designers who sell downloadable art, printables and custom work are seeing their prices being undercut by Etsy sellers using generative AI, PCMag reports.

“What happened to Etsy?” CNBC asked in a recent story. “Some of its sellers say the company’s laser-sharp focus on growth has pushed Etsy away from its core mission — to keep commerce human.” Currently, shops can be shut down for using photos that accurately depict their products, but selling AI-generated designs currently otherwise doesn’t break any rules.

Etsy seems to be aware that low-quality items are an issue in the marketplace. In its 2024 transparency report, Etsy said it removed four times as many listings for violating its Handmade Policy in 2023 than in the previous year.

In a comment to CNBC, Etsy said that it “recognizes its current definition of handmade, includes a broad spectrum of items, and will clarify its policies to be more transparent about what belongs on Etsy in the coming months.”

That echoes Etsy’s statement in its transparency report: “We’re updating and strengthening our policies that dictate what can and can’t be sold on Etsy, including in emerging areas such as AI-generated content. We’re also excited to further clarify and categorize our Handmade Policy, building on our progress in improving enforcement.”

Amazon Handmade specifically prohibits digital and downloadable products, which removes one easily exploited format for AI sellers. Smaller online handmade marketplaces are taking a clear stance against AI.

GoImagine, a marketplace with more than 6,000 makers and artists, has seen people trying to sign up with AI-generated art daily. “It’s easy to spot the AI art now, but as the technology advances it will be harder,” founder Jon Lincoln says. GoImagine’s Handmade Integrity Team, which includes community members, helped create the language of the site’s handmade guidelines.

“The reality is artificial intelligence is just that — artificial. It’s a combination of stolen images and graphics from the internet used to compile a computer-created image,” Lincoln says. “It goes against everything that a buyer wants in a ‘handmade’ product, but often times they don’t know what they are buying.”

New York City-based attorney Mary Cannon, who hosts the Trademark Insiders podcast, points out that while artists using tools like Photoshop was once considered “cheating,” digital art is now a widely accepted medium. But in the craft world, consumers still have certain expectations.

“Buyers in these spaces tend to crave creations that embody an artist’s heart and soul, and reflect countless hours of dedicated effort,” Cannon says. “It’s not just about the final product, but rather the blood, sweat and tears, and the talent behind it.”

Austin Champion, an intellectual property attorney in Dallas, points out that machine learning tools draw on existing works to create new ones.

“In the craft industry, AI could learn how to create new fabric patterns by studying existing fabric patterns,” Champion says. “Some may argue that AI is merely copying existing works, which is copyright infringement. But other people argue that we all learn how to create unique works of art by studying the works of art that come before us.”

If AI-generated work is routinely being passed off as handmade by a human, platforms could find themselves in violation of consumer protection laws. “If this runs rampant, platforms like Etsy could face lawsuits or regulatory action,” Cannon says. Consumer trust may decline if a platform is flooded with AI-generated work.

Under the 1998 Digital Millennium Copyright Act, e-commerce sites like Etsy are generally protected from being liable for hosting works that infringe a copyright if they take action once being notified. Some current lawsuits relating to AI copyright infringement are cases where the output looks very similar to the original input.

But it’s important to remember that “copyright law only protects materials that are the product of human creativity,” Champion says. “This means you cannot prevent others from copying your AI generated works, and you cannot obtain copyright protection for those works. In many ways, AI generated art is somewhat value-less.”

That means despite the current downward price pressure on certain categories of products, human-created intellectual property is more likely to retain its value in the long-run.

“The spirit and skill behind human creativity may eventually be perceived as rarer and more valuable with the proliferation of AI-generated images,” Cannon says.

Champion concurs: “I think we’ll see a strong demand for talented human artists for many years to come.”