I always assumed Microsoft did not condone Wine or other re-implementations of their APIs (like ReactOS), but that they were protected by DMCA reverse engineering provisions and anyway too insignificant to send the legal team after.
Wikipedia says,
> Until 2020, Microsoft had not made any public statements about Wine. ... On 16 February 2005, Ivan Leo Puoti discovered that Microsoft had started checking the Windows Registry for the Wine configuration key and would block the Windows Update for any component. As Puoti noted: "It's also the first time Microsoft acknowledges the existence of Wine."
> In January 2020, Microsoft cited Wine as a positive consequence of being able to reimplement APIs, in its amicus curiae brief for Google LLC v. Oracle America, Inc.