Green’s Dictionary of Slang

potty adj.1

[SE pot, a tankard, thus lit. ‘drunken’]

1. [mid-19C+] usu. of a plan or scheme, dubious, indifferent.

2. [mid-19C+] insignificant, feeble.

3. [late 19C+] easy to manage, simple.

4. [20C+] crazy, eccentric; thus potty about, madly in love with, obsessed by.

5. [1900s] (Aus.) drunk.

In compounds

potty house (n.)

[1900s–30s] a lunatic asylum.