Farming game drops via custom clients is prohibited since the TF2 days. Farming cards doesn't seem to be though. The support pages recognize the existence of "Steam idlers".

My understanding is that farming cards is just some minimal application masquerading as some game running to Steam Client. Which then updates server and occasionally drops cards. Which then can be sold or crafted to badges.

From Valve viewpoint this might even be preferable as alternative is users actually downloading those games and just running them. Not to mention the 10%-33% tax they take on their market trasnactions.