The frontpage right now says "Defold is free and open source software released under a permissive license derived from the popular Apache 2.0 License."

So it at the very least claims to be a "permissive" license. The non-commercial restrictions are not mentioned there, one has to read on.

The vast majority of developers that would be interested in this engine only care about building games with it and selling those without any worry, without any interest in selling any modifications to the engine itself as a new package. They are presumably the target audience for whom this can be considered a permissive license.

Both popular commercial game engines out there (Unity and Unreal) have huge markets for all kind of engine extensions. Almost all game developers use said extensions and many are interested in selling them.

I don't see why you couldn't make and sell mods for Defold. It's the engine itself that the license stops you selling, not things that use it.

I'm fairly sure Epic don't let people fork, modify and then sell Unreal Engine either.

Exactly. The license used for Defold (https://defold.com/license/) says:

* You are free to commercialise any software created using Defold * You are free to commercialise any plugin, extension or tool created for use with Defold * You are free to modify Defold and you are not required to share the changes * You are free to distribute original or modified (derivative) versions of Defold)