The clause you cited as well as the "Termination" section and the non-commercial restriction make it a non-free license. Besides the direct issues with that, it also means all software covered by this license is unsuitable for FOSS-only distributions like Debian or F-Droid. It's not entirely clear to me if the license is copyleft; derivative works have similar problems if so.
As an aside, Eron Wolf, the billionaire behind FUTO, has some rather... out of touch views[0] on the meaning of open source, and seems very committed to diluting the term to mean something closer source-available by removing the most of the rights granted (as defined by FSF, OSI, DFSG and others).
Sorry, but really when it come to open source: money dont smell. If they do give money to real projects with OSI-approved licenses it doesnt matter to me what else they do, who their sponsors are, etc. Well unless they actually do something illegal.
This is because 99.9% open source projects not targeted enterprise never ever see more than $100 of donations and being maintainer of such software is literally thankless job that will never pay you anything.
Blaming organizations for giving money or maintainers for taking money is worse you can do no matter who sponsor is: FSF, FUTO, Cloudflare, Microsoft, Facebook, Oracle, DARPA or MAGA INC.
Dont like FUTO or its owner? Make a better fund, give your money to SFC, FSF or whatever open source sponsor organization is acceptible to you.
There is so little money in end-user open source software and making pie even smaller or antoganizing thankless people maintaining it is awful. Everyone doing this is either dumb, malicious or both.
eron/FUTO are not trying to dilute the term Open Source, they are trying to address a real problem that Free Software and Open Source face, and that we do need to find a solution for. their initial wording may not have been ideal, but that is because there is no defined terminology, and because the point is to be close to open source as is possible.
this is not an out of touch view. on the contrary. what is out of touch is to believe that Open Source is perfect as it is, and nothing should be changed about it.
the problem that FUTO is trying to address is the commercial exploitation by large companies (like AWS) at the expense of the original creators. a problem that several companies (redis, mongodb, elasticsearch, zerotier, terraform, vagrant, and many more...) in recent years had to face, causing them to change their license.
btw: i recently asked bruce about this and he said that AI now changes everything and he wants to wait and see how that will affect Open Source.
it is not obvious that FUTO's approach is the right one. it is an attempt at addressing the problem, and i expect that it will take more such experiments to shake out what the best approach to this problem really is.
Is it this part?
you may not remove or obscure any functionality in the software related to payment to the Licensor in any copy you distribute to others.