(Disclaimer: I am not a lawyer, nor do I pretend to be one. I'm not dispensing legal advice, nor am I actually touching on how the law works. I'm a creator who's stating an opinion, as per my First Amendment rights.)
Thanks to FA user ReezyTheGarchomp posting a journal about it, I became aware of a video from Rambutan Illustrations titled "Is Fanart ILLEGAL?". Clickbait title aside, the video itself is well written and worded, proper disclaimers were provided about the artist not being a lawyer, and research was done on the subject.
However, it's very clear that it wasn't a lot of research, likely consisting of Google searches on the subject. I say this because, in their cited sources, there are no links to actual laws provided, nor are there any cited case laws in which these laws are put into practice. The only sources she cites are Nintendo's very simple page on copyright, a post from Toby Fox about how he wishes his IP and copyrights to be used, a post from Redbubble about the previous post from Toby Fox, and a video from a laywer's talk at COMIC CON.
However, this comes from someone who doesn't want people selling fan works of their intellectual property (thus a conflict of interest to begin with), and really wasn't given the due diligence that the subject deserves.
I'm not ripping on Rambutan Illustrations for posting this. She did a lot of hard work in making this thing. But IP, copyright, and trademark law is very complex. Far more so than a simple 10 or 30 minute video could even hope to cover.
Concepts like "generic characters vs specific characters", "generic species vs individual character", "Is it copyright or is it a trademark?", and even something as simple as "What are the creator's wishes?" are all factors that have to be taken into account. Works involving original characters aren't held to the same laws as canonical characters, as a species isn't always afforded the same protections under IP and trademark law.
If you want an example of this, I suggest reading "The Protection of Fictional Characters" by Ivan Hoffman, B.A. J.D..
For another quick example: a generic Pokemon trainer is an idea, while Ash Ketchum/Satoshi is a developed character. The latter will have far more protections under law than the former will, especially in the sale of merchandise. Likewise, a generic Lucario character is a generic idea, but once its given a name, gender, backstory, etc..., then it becomes a developed character, at which point lawful protections change, and may even grant the creator of this original character rights that the species creator would not be able to override.
That all said, this is a subject that is more complex than even I myself can tackle, much less Rambutan. We've both looked into the subject, but it goes much farther than one would know from a quick web search.
Leave these subjects to the lawers. Don't take the word of someone outside of the law world as canoncial proof that something is or isn't illegal. That goes for myself as well. Always consult a lawyer when in doubt!!!!
That is all.