From what I understand, it’s a known issue that’s been around for a while. Was just able to confirm it myself. I dusted off my old Steam Controller to try out on a game just released in Open Beta that I was alpha testing. Currently, it has no controller support but Steam can work around that.
Anyway, what I was noticing was that the rendered mouse cursor stayed put but an “invisible cursor” was still moving around. As I said, it’s a known Wayland issue (since at least 2019 from what I could find out). Restarting with Xorg makes the problem go away.
Further digging around and, this person on GitHub is offering a fix in the form of some code that replaces xtest.
Anyway, thought some might find it interesting…