Prefabs appear in the Scene window without being created in the Hierarchy when drag and dropping over the latest Overlays design

How to reproduce:
1. Open the attached “case IN-10929” project
2. Select a Prefab from “Assets → Prefabs” directory in the Project Window
3. Drag that Prefab to the Scene window and release when mouse is over Overlays panel

Expected result: Prefab preview disappears in the Scene view
Actual result: Prefab is created in the Scene window without appearing in the Hierarchy

Reproducible with: 2021.3.7f1, 2022.1.11f1, 2022.2.0a8
Not reproducible with: 2022.2.0a9, 2022.2.0b3, 2023.1.0a4
Couldn’t test with: 2020.3.37f1 (the latest Overlays section isn’t featured)

Reproduced on: macOS 12.3 (Intel), Windows 11