This is affecting setups that are using a device-code-only flow that Microsoft recommend against.

> Only allow device code flow where necessary. Microsoft recommends blocking device code flow wherever possible. Where necessary, configure Microsoft Entra ID’s device code flow in your Conditional Access policies.

https://www.microsoft.com/en-us/security/blog/2025/02/13/sto...

Because a device code wouldn't be needed if the user could easily login on the device. The user is already fully logged in on the computer where they enter the code.