Muslin is cotton woven in a loose, open weave. Those small gaps between the threads are what make it breathable, lightweight and quick-drying, but they also mean the fabric doesn't hold a crisp, pressed look for long. Wrinkles show up easily, and that's just how muslin behaves, not a sign anything is wrong with the piece you got.
Our clothes are double-layer muslin cotton, and we pre-wash everything before it ships so it arrives soft instead of stiff and boxy. We sew with flat seams and use child-safe dyes with no harsh finishes. That softness is part of why the wrinkles look soft and rumpled rather than sharp creases, and once you're used to it, it stops looking like a problem and just looks like muslin.
To smooth things out, wash cold on a gentle cycle and skip the fabric softener, it coats the fibers and works against the breathability. Tumble dry on low or hang the piece up while it's still a bit damp, and most wrinkles will drop out on their own. If you want it smoother, a quick pass with a low iron works fine too, just keep the heat low. Either way, the fabric keeps softening and relaxing with every wash.