The CPSC has just issued a one-year stay on testing requirements for the CPSIA. This means, people can keep selling! However, they are still liable if they do sell anything that doesn't meet the limits:
Manufacturers and importers -- large and small -- of children’s products will not need to test or certify to these new requirements, but will need to meet the lead and phthalates limits, mandatory toy standards and other requirements.
The good: etsy can live on! The insanely expensive testing is suspended for a year -- and during this year, perhaps Congress can modify this law to make it work.
The bad: this could make the movement to fix this lose steam, if people think everything is fine, and we'll all be back where we are now next year. And, no-one is completely off the hook.
A good and cautious analysis is up at ZRecommends.