Hi David,
I believe the problem here is that Mathematica offered a solution that is in fact not valid at the point (-1,1) which was a defined initial condition. So there is no contradiction of the uniqueness theorem. You will see below (and I attach the notebook) that the solution found is valid only for t <= -2 or t > 0. I find it a bit odd that Mathematica did in fact provide a solution that does not include the initial conditions.
(* equation *)
eq = y'[t] == (2 Sqrt[y[t]] - 2 y[t])/t
(* solution *)
sol = DSolve[{eq, y[-1] == 1}, y, t] // First
(* it verifies, but with restrictions *)
Reduce[eq /. sol, t, Reals]
(* t\[LessEqual]-2||t>0 *)
(* look at LHS and RHS over a range *)
backsub = eq /. sol
lhs = backsub[[1]]
rhs = backsub[[2]]
(* we see that this is NOT a solution at (-1,1) *)
Plot[{lhs, rhs}, {t, -3, 3}, PlotLegends -> {"LHS", "RHS"}]

Attachments: