A group of Israeli researchers explored the security of the Visual Studio Code marketplace and managed to "infect" over 100 organizations by trojanizing a copy of the popular 'Dracula Official theme to include risky code. Further research into the VSCode Marketplace found thousands of extensions with millions of installs.
You declare it in the package.json as a category when publishing. It’s completely self-selected with no oversight, review, or enforced permissions.
Microsoft security practices haven’t changed much over the decades