How is it not open-source?

It's licensed under MIT + VS Marketplace Terms: https://github.com/microsoft/vscode-cpptools?tab=License-1-o...

If you fork it and don't use VS Marketplace, it's only MIT. Or am I missing something?

You missed that the ‚binary‘ vsix file has a different license: https://marketplace.visualstudio.com/items/ms-vscode.cpptool...

(The license like that existed before cursor, it was basically the reason for vscodium)

(Source is https://marketplace.visualstudio.com/items?itemName=ms-vscod... the license link at the bottom)

The same problem with the c# extension, which has had an even bigger shitstorm since some parts of the extension need a ms account and depending on the company needs to be paid

I guess it's the "additional binaries" which are not included.. but that's a guess, we need someone to confirm.