A bug was found in VS Code 1.142.0-insider: when creating a new chat in agent mode, the editor silently resets the user-selected 'Local' agent back to Copilot, and requests instead of going to a local model or paid API key go to the free tier of the Microsoft mai-code-flash model. Developer David Alsh (alshdavid) described the issue on October 9, 2026, in bug report #340651 in the microsoft/vscode repository; as of the check, the issue remains open, and the bug, according to the author, reproduces even with all extensions disabled.
What happened
On October 9, 2026, developer David Alsh (alshdavid) opened bug report #340651 in the microsoft/vscode repository. In the configuration he specified (VS Code 1.142.0-insider, Electron 43.7.7, @github/copilot 1.0.94-3, Windows x64), when creating a new chat in agent mode, the user-selected 'Local' agent is silently replaced with Copilot, and requests are actually directed to the free tier of the mai-code-flash model. The author states that reproduction persists even with all extensions disabled, meaning the issue, according to his data, is not related to third-party plugins. The issue is assigned to VS Code maintainer Rob Lourens (roblourens) and remains open without a fix as of the check.
Context
The BYO-agent (bring your own model) setting in the editor is part of a workflow where a developer connects their own model: a local server or a paid API key, chosen for the task and privacy requirements. The agent selection in the interface is a UI state, not a technical routing contract: until it is verifiable, the actual traffic direction is determined by the editor and Copilot agent code, not the user preset. The point of the BYO configuration is that prompts and code snippets go to the specified model, usually for privacy or cost savings; if the selection is silently reset, the routing promise is not kept, and trust in 'UI settings' as a privacy guarantee becomes unfounded.
Why this matters for the industry
Such a bug hits the only asset on which an entire layer of products around BYO models in editors relies: trust that user configuration actually determines the request route. For companies with privacy requirements, this means that agent configuration is not a reliable routing guarantee, and compliance audits cannot be built solely on user presets — editor agent pipelines need to be included in privacy audits and the actual route needs to be verified at the network level. For builders, the case outlines a specific product niche: visible and verifiable request routing — an active model indicator, explicit fallback consent, exportable route logs. If the regression is confirmed on a wide sample, an accelerated fix and a review of how editors signal the actual model for agent requests are likely, and interest in editors and forks with guaranteed routing may grow.
Why this matters for users
Those working with local models or their own API keys in VS Code, including 1.142.x insider builds, should manually check the agent selection after each 'New chat' — otherwise prompts and code snippets may go to mai-code-flash without your knowledge. Sensitive work with a BYO agent on an insider version is best not done without network verification: log outgoing requests at a proxy or firewall and, if necessary, block Copilot and mai endpoints at the environment level if working only with local models. It is useful to follow issue #340651: confirmations from other users and, likely, a pointer to a specific regression change in @github/copilot should appear there.
What is still unknown / limitations
The evidence base is currently weak: the situation is described in one bug report in one configuration — only Windows x64 and an insider build, and the Hacker News discussion has 3 points and 1 comment. There are no reproductions on the stable channel, macOS, or Linux, no pointer to a specific regression diff, and no network logs confirming exactly where the requests went. The author's claim that mai-code-flash collects data is the reporter's words: the available materials do not contain the text of the free tier policy or other confirmation. Finally, one report does not imply a conclusion about intentional traffic redistribution in favor of Microsoft — with current data, this looks like a UI state regression, not an intentional decision.
Sources
Author
Look at AI, editorial team