The headline is almost correct, but as with all things, the devil is in the details.
From the CPSC order -- which I'm very grateful the article has linked to -- Amazon is a distributor as defined in the Consumer Protection Safety Act for products they market as part of the Fulfilled by Amazon program. Since they're not the manufacturer, Amazon is not subject to product liability, but they do have a responsibility to not sell products that don't comply with published, mandatory safety standards. They also have an obligation to recapture hazardous products that were sold and to provide refunds. Amazon has not been doing all of this.
In short, Amazon's defense was that they're a "third party logistics provider" under the Act, meaning they just warehouse and ship the products, which doesn't come with the aforementioned obligations for a "distributor". The administrative law judge and CPSC rejected this, because Fulfilled by Amazon is more than just warehousing. They noted that Amazon also substantially handles payment processing, customer service, returns, and packaging/gift packaging. They also noted that the terms between Amazon and its sellers heavily discussed things which are the customary province of distributors, with Amazon assuming a lot of those roles.
So what can we expect? Possibly an appeal through the courts. But the order has decent odds of standing, as it's premised on fairly clear definitions in the law, plus the findings of an administrative law judge and the CPSC's own findings, which all agree. And the order really just requires Amazon to draft a plan to implement its obligations; it doesn't force a change quite yet.
Assuming Amazon decides to cut their losses and comply, only Fulfilled by Amazon products will be affected. Anything sold and shipped by the seller themselves could still be listed on Amazon, with the seller carrying the obligations under the Act.