A modding ban does not prevent people from uploading good textures and making great CAWs. The mod ban just stops you from doing shit like modding arenas, putting in cages that shouldn't be in the game, or pulling CAWs that are otherwise inaccessible from the game files (which is what Status is known for)
You can still do plenty of things with the mod blocker in place.
For example, you can still use custom theme music by converting mp3s of themes you want to the proper format and then renaming them, throwing them in the game files. So, if you want to add Kobashi's Grand Sword, you just replace "Funky 3", one of the generic themes, in the game files, and there you go, it works. No mods required.
this really isn't that big of a deal, it just means the game won't get crazy mod support like 2k19 has
TL;DR it's shit but it ain't the end of the world