it definitely gets used, and i hope that the application is denied, but i also hope this is another wake up call for people that pick unreserved domains.
if you choose to use an unreserved domain, you are choosing to accept the risk of something like this happening. take ownership of your choices. "but other people use it" is not a great defense.
As an example, at one point in the past (I think in the 90's?), Microsoft recommended using .local for AD domains, whereas now they explicitly recommend against it.