Dry sponges placed in flowing water (as opposed to water source blocks) have no effect on the water and remain dry.
To reproduce:
Place a water source block on a flat area and allow it to spread
Place a dry sponge block in the flowing water at least one block away from the water source
Expected result:
The water surrounding the sponge is removed for several blocks, including the water source so that all the water disappears. The sponge becomes wet.
Actual result:
No effect on the water at all. The sponge remains dry.
Edit (and facepalm): If the sponge is placed in the source block, the effect should spread to the flowing water but does not. Flowing water is just not affected at all by the sponge.
Can reproduce in 18w10c