keys getting dropped after using the caps key after updating to 26.0.1

Hi, after updating my Macbook pro M2 to Tahoe 26.0.1, As I type when I press the Caps Lock key the computer starts dropping the keys that I'm typing for a brief moment. This is happening on both the built-in keyboard and on a USB keyboard and it didn't happen before the upgrade to Tahoe. This does not happpen if I use the Shift key to get upper case letters.

So far I tried disabling all the spell checks and corrections in system settings > keyboard > text replacement but it did not help. In the shortcuts > modifier keys section Caps Lock only maps to Caps locks