The issue that most people bring up is that it optimises for people with free time who can work on these things out of hours.

The same arguments are made against take-home tests.

Personally I'm not sure we can do anything really except try to make ourselves excellent judges of character when interviewing... because people will optimise for the interview if they know what's coming.

No one’s time is free though. Whiteboard coding was imo more fair, less biased, and signal rich. AI does change the equation a bit now.