How can an iPhone be blacklisted but not activation locked?

Activation Lock is a feature implemented by Apple’s systems to deter theft. (Effectively, the device is prohibited from communicating w/ any of Apple’s systems or services)

Blacklisting is a feature implemented by carriers when a phone has been reported to them as stolen. (It prevents the device from connecting via the mobile network)

So these are two parallel functions; each implemented at a different “layer” by different entities.

If an iPhone was reported stolen to a carrier, and then subsequently deleted from the user’s AppleID … the result could be the behavior you’re observing.

If you are the owner or the owner has shared all information with you then to open Activation Lock:- If it is Activation locked, read here --> Turn off Activation Lock - Apple Support Activation Lock for iPhone, iPad, and iPod touch - Apple Support

Learn how to remove a device from a previous owner's account.

If you are not the owner and do not have the Apple ID and Password then there is no way that you can get into this iPhone unless the original owner shares the Apple ID and password with you. If you are lucky you can get into this iPhone if they (owner) accidentally remove the device from their Apple ID.

To be able to use any SIM across the globe you must have "No SIM Restriction" against Network Provider Lock. Please refer to the pic below.

Carrier Lock:- Request your iPhone’s original Carrier to unlock your iPhone and if they agree and do it, then you may know the further process here --> How to unlock your iPhone for use with a different carrier ...

Device Unlocking Policies | Verizon Privacy Policy

Unlock a Phone or Device - AT&T Device Unlock Portal

Unlocking your Sprint device - T-Mobile

FAQs about unlocking your Sprint device

Unlock Your Phone for Spectrum Mobile

A blacklisted phone usually means it was reported to the carrier as stolen, and a replacement was provided by the carrier or insurance. The old phone was reported as stolen to the carrier, and the carrier blacklisted it. Only that carrier can remove the blacklisting or any carrier lock.

This is a common scam. If this is the case, then either the phone was stolen and then sold by the thief, or falsely reported as stolen and then sold by its original owner (who received a replacement).

My friend has a similar problem. His phone is blacklisted but he has created his own iCloud & uses a SIM card and it works. Can he just use the phone going forward?

No.