Here is a video of this issue impacting game chat on a third party server. Such custom formatting is often seen in player names/ranks, posing a problem for supporting 1.21.9+ for impacted servers.
For clarification it may be good to point out this started in 1.21.5 when that data fix was first put in place, not only in 1.21.8
This issue still occurs in 26.2 but is now more exaggerated from compounding with MC-308836