Chrome Version: M61.0.3163.123 stable kip
OS: ChromeOS 9765.85.0

What steps will reproduce the problem?
(1) On CPanel Device Settings, select Restrict Sign-into list of users and add a few non-wildcard email addresses to the whitelist.
(2) Sign in as guest on Chrome device and confirm the policy is downloaded.
(3) Sign in as a user not in the whitelist.


What is the expected result?
Sign-in is not allowed for user not among the whitelist.


What happens instead?
"Network not available" screen is shown right after entering the email address and before asking for password.


Other observations:

If click on the "browse as guest" in the "Network not available" dialog, browsing to Internet is working proving the network is fine.

If sign-in as a whitelisted user, password screen is shown and able to sign-in successful.

After sign-in as a non-whitelisted user and is shown "Network not available", press Esc key or click on Back on the dialog. When clicking on "Add person" on the shelf, a alert dialog pops up saying "You are not authorized to use this device. Please contact the administrator for sign-in permission".  Click on "TRY AGAIN", only then the sign-in dialog would appear.

This issue was reproduced on M61.0.3163.113 9765.76.0 stable kip, M62.0.3203.63 9901.49.0 beta daisy and M63.0.3299.11 10032.7.0 dev kip. 

Reproduced on Wifi and Ethernet connection via USB adapter.

Video is available at:
https://drive.google.com/file/d/0B66sLSSfR23oQWRyWUdxektJbzA/view?usp=sharing