What is Amazon policy on mod creators selling content?

Is it possible for me to create a game, allow it to be modded, and then allow the modders to sell their mods?

You are allowed to distribute your compiled
game and your community can mod the game and distribute their mods. The key
take away here is that you’re only allowed to distribute your compiled game and
any associated compiled editing tools. You’re not allowed to redistribute any
Lumberyard source code. Below is from the Lumberyard FAQ:

Mods

Q. Can I include Lumberyard’s tools so my players can build mods for my
game?

Yes. Your right to redistribute Lumberyard in your game includes the right to
redistribute pieces of the development environment in your game too. A list of
redistributable components is included in the documentation.
These rights also apply to companion products that you make available to end
users to modify and create derivative works of your game. If you want to
distribute Lumberyard components in source code form, please contact us.

Thanks
for your interest in Lumberyard and please let us know if you have any more
questions.