This isn't so much "authorized fanfic" as "crowdsourcing licensed tie-ins." One commenter at The Passive Voice is one of the
50 authors who'll be showcased to start off the program; the stories are vetted by an editor who decides if they're in line with the "World" being created.
The stories may not go through a standard editing process, but they apparently will be hand-selected, and there's a contract involved, not a clickthrough TOS. Several pro authors have said the terms described look very similar to "work for hire" contracts for licensed tie-ins.
"Fanfiction" is a trendy word in writing circles right now, but it's not what this business program is about. There's no sense that this will allow anything like the creativity and scope that exists in fanfic, and the as-yet-unreleased guidelines for working in each "World" may very well include "no romantic pairings aside from canonical ones" (presumably, they'd provide a list) and "no sexuality beyond a PG-ish rating" (very different from the "no porn" rule.)
It's worth noting that Amazon's KDP platform has a "no pornography" rule, which apparently still allows for a large Erotica category, so whatever Amazon means by "pornography," it doesn't include Selena Kitt's stories.