you can’t use most open source code “however you like” either
Alright, sure my language was overly broad. "The licensing is restrictive in a way which makes it clearly not open source." would have been a better choice.
...the main restriction with unreal engine is that you can’t mix it with copyleft licenses and you can’t use it commercially.
So, it's not open source.
...but you can do what most people want to do, modify, extend, fix, learn. that’s the most relevant thing for what we are talking about here
That still doesn't make it open source, mainly because you are missing one of biggest aspects, distribution.