The problem
$ vsce package --no-dependencies
WARNING LICENSE, LICENSE.md, or LICENSE.txt not found
Do you want to continue? [y/N]
The quote from the npm documentation
Certain files are always included, regardless of settings:
package.json
README
LICENSE / LICENCE
The file in the "main" field
The file(s) in the "bin" field
https://docs.npmjs.com/cli/v10/configuring-npm/package-json?v=true#files
Note
I am using eslint-plugin-package-json which shows the following error when I include the LICENSE in the fields property:
Explicitly declaring "LICENSE" in "files" is unnecessary; it's included by default.eslint (package-json/no-redundant-files)