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.
Because we live in a broken world and nothing matters.
On a more serious note, it’s a pretty horrifying misfeature. What’s even more worrying is that by all appearances Microsoft doesn’t give a shit, if they apparently didn’t even bother removing the malicious extensions that were reported. Not that I’m surprised, but still.
Why can a Word or Excel file execute shell code? Why does M$ SQL Server have xp_cmdshell?
Because devs chose to live in this part of the world, dictated by M$ and other large companies, who just don’t care.