I've lived in New York, and it's just a fact of life on the subway, kind of like the way that it stinks on hot summer days. I'd rather that the police and the court system spend their resources on real crimes because I can always ignore these guys and the panhandlers while I read my book in peace.
And that is why it's tolerated to a certain threshold. Thankfully (for us and him) we're still below the threshold. But if more people start selling candy on the subway you can bet you'd be happy they did something about it. And this dude would be making significantly less money.