Yes, its the indentation. However, this way it still will not work properly.
If you do it that way it doesn’t matter, whether the hero has the token “Knows Camilla” or not. The engine will bring up the choice window anyway. This is because the first if-command will not bind any program line at all. Try the following indentation instead.
if hero has token "Knows Camilla" Camilla gives choices for "Do you have any fish?" in case "Yes. Here you go." if hero number of "Fish" >= 1 hero number of "Fish" decreases with 1 hero swing weapon ability damage increases with 1 Camilla says "Pleasure doing business with you!" else Camilla says "Come back when you have fish."
In order to learn more about indentations, you also could have a look at the RPG Playground’s help. Search for “advanced tutorial on screenplay actions” in order to learn everything about indentations and many more from beginner to expert.