I managed to solve it, it had to do with Microsoft Company portal.
I found the solution in another thread, pasted the post below:
Superleccy
User level:
Level 1
(9 points)
macOS
Speciality level out of ten: 0
Feb 19, 2021 11:38 PM in response to MaikelV
This is brilliant, thank you. I've never been able to run Apple Arcade games on my Mac unless I created a new user. And I didn't want to do that. And I didn't know what was causing it until now. But you are right. It's Microsoft Company Portal. Sadly, that is an application that I can't do without.
I didn't delete the whole of ~/Library/Caches. I just deleted the folder ~/Library/Caches/CompanyPortalCache. Everything in there was dated as "last modified in 2038". Everything works fine now. Am completely amazed. Thank you.
It is early days, but my corp Microsoft app access via Company Portal still seems to work too. Time will tell if Company Portal and Apple Arcade can continue to coexist side by side.
Thanks again!