The Microsoft Store only (Recommended) Applocker Issue

[techieg4]

I have Windows 365 Business SKU (Windows 11) with no GPO or on-premises infrastructure. These Cloud PCs exhibit a persistent problem with the Choose where to get apps drop down set to "The Microsoft Store only (Recommended)" and grayed out, which prevents any non-store app from being installed. While this can be controlled using Intune, in this case, for troubleshooting purposes, all Intune policies have been unassigned. Yet the issue persists even after resetting the Cloud PCs after each change. 

Any pointer on what may be the issue here will be helpful.

[#2]

@techieg4 

save the install file on a usb and run it works like a charm

[#3]

Thanks but this is supposed to be a secure DevOps environment, so this won't work. USB access is blocked to prvent app development data and source code exfiltration..