Windows Defender Application Guard incompatible with CWDIllegalInDllSearch registry setting

[JSp42]

WDAG for the new Chromium based Edge does not work when the value "CWDIllegalInDllSearch" in 

"HKLM\SYSTEM\CurrentControlSet\Control\Session Manager" is set to "dword:ffffffff".

This is a defense in depth setting described in "A new CWDIllegalInDllSearch registry entry is available to control the DLL search path algorithm" (KB2264107).

When this entry exists (reboot required), the menu entry "New Application Guard Window" does not show and only the old Edge WDAG works.

[#2]

I'm on Windows insider fast build 18950, searched through my entire registry and couldn't find "CWDIllegalInDllSearch".
I have Windows defender application guard extension installed on the new Edge Canary, enabled it in Windows Defender and installed the app from Microsoft Store. when i try to open a new Application guard Window it opens the New Edge Canary.

[#3 · Accepted solution]

@JSp42 - Thank you for discovering this issue! Based on your feedback we have taken a fix to this and its available in the latest canary build. Please let us know if you still see this issue.

[#4]

@Arunesh_Chandra I can confirm that w/ Edge Dev 78.0.268.3 the issue has been resolved.

Sorry for my late response but I only discovered your reply today.

Thanks for your help.