I mean it's not NewPipe's fault that Google Play hosts malware.

Based on what Louis Rossmann said it does seem the more restrictive licence comes from a place of good intentions:

[11:19] If you download this application and you decide that you want to modify the source code so you can run a build that's a little bit more amendable to your use case on your phone, we have no problem with that. However if you modify the source code of this application to insert advertisements trackers or malware in it and then try to redistribute our application with maare ads or trackers in it in a deceptive way we will come after you. That is why we have a license that is not as permissive as NewPipes'.

But idk if that's also what the license actually means legally-speaking. I'm no expert but section 4 seems pretty dubious:

FUTO TEMPORARY LICENSE:

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Last updated 7 June 2023.