The way I read it in this context is that an existing codebase has license (whether GPL, LGPL, or proprietary or whatever), and that by "laundering" the codebase through an LLM, the output no longer retains the retains the license terms. In the US at least, the Supreme Court has ruled that LLM output is uncopyrightable.
So as @cwebber highlights, either the licensewashing works, in which case LLMs can scrub licenses off proprietary codebases giving a leg up on "reproducing" proprietary codebases into the public domain; or it doesn't work, in which case LLM-produced code becomes subject to the licensing of the original code.