Holly, the point isn't hard to grasp. Fan made or not, the fact its Mario not on a Nintendo device or without Nintendo's consent affects the IPs quality in itself and profits Sony and not Nintendo since Dreams is only on PS4. If Sony want content like that to be there without any issues than maybe Sony should release Dreams on the Switch, than Nintendo might let it go. Fan made content will help sell Dreams and PS4s not Nintendo Switches, that's the bottom line and that's why Nintendo want to take this stuff down. Want Mario? buy a Switch, there is a perfectly good Mario game out there in Mario Odyssey.
I agree on Nintendo taking full control on there IP's reputations and id expect Sony to do the exact same if Nintendo had a content creating tool using IPs from Sony. This is why Nintendo have the most valuable IPs in the entire industry, Nintendo don't let them get washed out by others.
Still you would need to prove the sales that were made because people wanted to play Mario games on PS4.
Second you would need to prove that dreams have a "content creating tool using IP" from Nintendo. Because it doesn't, people can create whatever they want with the tool, but there isn't any Nintendo IP on the tool, if there was they could ask for sanction against sony itself.
Third this type of situation would most likely fall under fair use as it is fan made content not for profit and not copying the content but recreating it.
duduspace11 "Well, since we are estimating costs, Pokemon Red/Blue did cost Nintendo about $50m to make back in 1996"
Mr Puggsly: "Hehe, I said good profit. You said big profit. Frankly, not losing money is what I meant by good. Don't get hung up on semantics"