In the short term, this is something the framework should be able to fix.  Fullscreen works on mobile, so it isn't broken wholesale:
https://davidwalsh.name/demo/fullscreen.php

You can also repro the above error by emulating a mobile device through chrome dev tools on the desktop, so it looks like they are handling their logic differently based on touch vs click (or potentially based on user agent).

There could be an issue in blink where the gesture is not being passed along, but to me, it looks like something that the framework should look into first.

+aelias@ to route further down the blink start if needed.

This sounds like https://docs.google.com/document/d/1oF1T3O7_E4t1PYHV6gyCwHxOi3ystm0eSL5xZu7nvOg/edit#heading=h.qq59ev3u8fba, an intentional security tightening that shipped in M56.  For any intervention, some developer pain is expected in order to force them to move to best practices, and since this has been in stable for 3 releases already, it seems this pain is tolerable and most developers have already adapted.  So I'll tentatively close as working as intended.

I thought the change in M56 is to not mark it as user gesture for scrolling. If user did tap, shouldn't this work?

It depends on the exact event they're triggering on.  It looks like this JS is going fullscreen on "pointerdown".  According to Rick's doc, that no longer works as of M56 -- I believe it should work if it changes to "pointerup" instead.

Making sense. Thanks.

Right, we don't want it to be possible for, (for example) an ad to take the page fullscreen when the user scrolls.  Moving the handler from pointerdown to pointerup will fix the problem.  The change is tracked in  issue 611981  and approved in https://groups.google.com/a/chromium.org/forum/#!topic/blink-dev/TO_x7FRkdmw.