Etsy’s crackdown on AI listings is unfolding alongside a return to buyer growth—and artificial intelligence is part of its response. On October 28, 2026, the marketplace reported its first year-over-year increase in active buyers in two years, as CEO Kruti Patel Goyal tightens listing rules while using AI to improve search and detect violations.
Key takeaways
Etsy’s active buyer base reached approximately 88 million, up 1% year over year.
Stricter listing rules require authentic product photos and clearer AI disclosures.
AI-generated art remains permitted with disclosure; bot-generated listings are prohibited.
Etsy credits search personalization with contributing to merchandise sales growth.
AI-generated listings strained buyer and seller trust
A surge of AI-generated art, bot-created listings and mass-produced goods eroded trust in Etsy ’s marketplace. Its active buyer count fell from approximately 93 million in 2023 to 86.5 million by the end of 2025.
Sellers complained that AI-supported listings appeared above their original products in search results and offered lower prices. Many left the platform. Low-quality listings also made it harder for shoppers to find suitable products.
The frustration extended to identifying what shoppers were buying. Etsy said many active buyers could not distinguish items involving AI-generated content, while sellers worried about their work appearing alongside products that used AI misleadingly.
Etsy’s crackdown on AI listings sets tighter boundaries
Etsy’s updated AI policy requires most listings to include at least one unedited photograph showing the actual product against a real background. Listing images must accurately reflect what the buyer will receive.
Secondary images can still use software or AI editing, provided they remain faithful to the physical item. When Etsy detects a potentially AI-generated image during upload, a pop-up asks the seller to confirm its use. Sellers can bear responsibility for refunds when delivered goods differ materially from their listings.
The rules also prohibit bot-generated listings . Sellers offering functional guides—including patterns, recipes and instructions—must create the information themselves rather than generate it with AI, and show an actual result produced using the guide. AI-generated art remains allowed when sellers disclose how it was made.
Goyal became CEO at the start of 2026 to address the marketplace’s challenges. She joined Etsy in 2011 and previously served as president and chief growth officer, overseeing engineering, marketing, strategy, seller support and buyer trust.
Her response pairs Etsy’s crackdown on misleading AI listings with an emphasis on human creativity. On the earnings call, she pointed to sellers’ creativity, craftsmanship and the human connections behind their products as the marketplace’s distinguishing strengths.
AI search tools accompany a return to marketplace growth
Etsy is using AI to personalize search, support sellers and identify listings that break its rules. Goyal said AI and machine learning can infer shoppers’ tastes, while an AI shopping assistant handles more complex, specific searches.
For sellers, the technology helps draft listings, manage inventory, find images, improve search visibility and promote products to influencers. Etsy also sees AI as a tool for detecting inappropriate AI use and removing noncompliant listings.
On the October 28 third-quarter earnings call, Chief Financial Officer Lanny Baker said trailing-12-month active buyers increased 1% to approximately 88 million . Active sellers recorded their strongest growth since 2024.
Goyal estimated that personalization improvements contributed approximately 2 percentage points to the annualized year-over-year gross merchandise sales growth rate by the third quarter.
During the third quarter, revenue climbed 11% to $692.5 million , and gross merchandise sales—representing the total value of goods sold via the marketplace—grew 9% to $2.65 billion. Etsy shares rose 4% on October 28 following the financial and user metrics announcement.
Article produced with the assistance of artificial intelligence and reviewed by the editorial team.
