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Surely there will be an eventual crackdown of sponsored content that isn't marked as such.

Crackdown by whom?

Advertisers and publishers are generally in favor of it, consumers don't care, watchdogs are toothless.

In the US, the FTC. Or do you consider them toothless? It does seem like they're at least making the appearance of trying: https://www.ftc.gov/news-events/press-releases/2016/03/lord-...

Product placement is legal in TV, why not papers published on arxiv?