This is just the next step in Embrace Extend Extinguish.
VSCode is "open source". Except it's not. The open source version cannot access the VSCode Marketplace which contains a lot of the high quality extensions. This is just slowly boiling the OSS frog.
Get ~100% of developers hooked on "open source" VSCode, then at some point when they decide they don't want to deal with some crap Microsoft added to the proprietary version (like, perhaps, locking many feature behind a premium subscription) and try to switch to the OSS version they discover they can't work at all because they can't use any of the language+other extensions they have come to rely on.