The huge number of items people have for sale with the words "London 2012" and even the Olympic rings (IOC are renowned as being extremely protective of the rings and the word 'olympics' and all derivates) makes me think it is just something that isn't enforced by Etsy. There is no way the handmade items found when searching for "London 2012" are licensed. Similarly, searching for Donald Duck or Mickey Mouse throws up a number of hand-made things profiting from intellectual property not owned by the seller.
The wording of the CIP policy seems to state that the only way copyright will be enforced is if the copyright holder themselves reports it and not other users/shoppers, so do people on Etsy get away with making profits on other people's property just by being subtle and not heavily advertising their goods?
Has anyone here been asked to remove stuff?
As an IP holder myself I wanted to see how it was handled here before listing, but so far it appears to be an illegal backwater for people ripping off others work. Is this too harsh of a judgement? Obviously there are also a lot of talented people creating original works, so good on you if you are one of them.