it also breaks query.cooldown_time_remaining as a result :/
Steps to Reproduce:
Make a normal custom item behavior and make sure that the item has the "minecraft:hand_equipped" component set to true.
Make the resources for the item and make sure that the item appears in your inventory when you give it to yourself.
Apply the behavior and resource pack to a world and give yourself the item
While holding the item on one account, join the game on another account. On the host account the item should look like it's held like a sword, while on the second account it will look like the first account is holding a regular item.
Observed Results:
For some reason components like "minecraft:hand_equipped" and "minecraft:foil" only work on the account that is hosting the world.
Expected Results:
Every player should be able to see the items the same way, no matter if they are hosting the world or not.
Hope this helps.
I am also having this issue. The version I am running is 1.16.40.
I'm currently having this issue on Windows 10.
It remains to affect the game in 1.21.