People forget that LLM code cannot be covered by copyright. So LLM code cannot be placed under an open source license

This is overstated. Not all LLM code is produced the same way. Code produced through substantial human creative input still falls under copyright, at least the way things are now. Besides, nothing legally prevents placing code under a license. Enforceability is the question, not permission.

It's a bit like saying speed limits don't apply on private property, therefore you can't have any traffic rules on your private racetrack.