Getting error that admin policies don't allow sharing with people outside, but the group I added is internal

Question

We have been creating numerous Teams/SharePoint sites for different projects. We create links to these sites in a specific SharePoint site, and set the visibility of each link to be seen by whoever is on the project the link points to. For example if we have a Team called Project X with a SharePoint site of /sites/ProjectX, then we'll set the visibility of the link to only be seen by the Project X Team by clicking on the dots menu for the specific .lnk file, selecting Manage Access, and trying to add them to Direct Access.

Today when I went to do this however, I get an error indicating the following:

I've not had this happen before. I don't get the error if I put in a user or security group, but I do if I select a Team. In fact, I get it if I select any Team--even one I've already granted to a different link. It also happens if I go back to one of my existing links and try to add another Team to view it. There are no external users in any of these Teams.

It's as if something changed so it thinks all of our Teams are external to the organization, but neither I nor the other admin have made any changes in the last few days. I did not have this problem last week when setting up these Teams.

Answer 1

Hi @Joe Grover
I have reproduced your issue on my site. It seems that something could be wrong:

As a workaround, if I grant permission to my Team through Manage access > Advanced > Grant Permissions, it will be OK:

You could send feedback to Microsoft SharePoint Feedback to submit this question.

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Answer 2

Perfect. I opened a support case with Microsoft yesterday and they confirmed this is an issue on their end and hopefully should have a fix soon. Using the Advanced settings as a workaround did the trick for me in the meantime. Thanks!