I can’t speak for what the person who wrote the challenge was trying to mean by “ethnic”, but I’ve also seen it used as saying “traditional for a cultural background” (be it white or not). It’s supposed to be related to ethnicity (specific cultural origin) rather than race (skin color and general geographical origin). The artist very well could’ve been trying to find one word to describe that, considering that all the prompts seem to be one word, and “traditional” would probably just result in pics of Ariel and other “traditional” pop culture/fairytale depictions of mermaids. I do feel like there’s a better word, though. I have definitely also seen “ethnic” used the way you’re talking about, and I overall agree that it’s stupid to do that - it just comes across as a euphemism to me, which defeats the whole purpose of diversity being normal and not something one should have a hang-up about.
About the art itself, I absolutely love the shrimp mermaid! Wonderful artwork, as before!
Edit: Holy crap. Mermay is legit run by a corporation or something? I’m still not surprised that the PR department screwed up, but I always thought it was just some independent artists who started it all.