Coop via Gamepass (PC): Clients nade launcher hits do not register and no explosion on impact. Only host does damage

I started a playtrough with my GF a couple of days ago and this issue was fist observed 2 days ago.

The standard grenade launcher projectiles either fly trough the enemies or hit them but with no explosion on hit.

Restarting the game/reconnecting did not solve the issue. It was no issue on Sunday/Monday and we don’t know what’s wrong.