My sister has been divorced for four years but has yet to seek an annulment. She is seeing a man whose divorce will not be final for another month or so. This man is not Catholic. I have watched her children when she has gone out with this man on several occasions. Have I sinned? Should I watch her children in the future while she sees this man?
Objectively speaking, your sister and her friend are engaging in an adulterous relationship. Not only is she not free to be dating in the eyes of the Church, but her friend is still legally married in the eyes of the state. Under such conditions, I cannot recommend accommodating her actions by freeing her to date him or anyone else.
If you babysat the children with the intention of helping out your sister, and did not deliberately do so in order to accommodate an adulterous relationship, it does not appear that you have committed sin. You may wish to consult with a priest or spiritual director to discern your motives and determine if confession is advisable or necessary. For the future, though, I recommend telling your sister that you are happy to spend time with her and her children, and will certainly help her out with babysitting in a true emergency; but that you cannot babysit for her when the purpose is to free her to go on a date.