Here is the reduced test case to reproduce this (I am using M71):

0) Use M70+ (Current M69 doesn't work)
1) Open https://m0interactive.com/sandbox/crbug882491/index.html
2) Launch DevTools in Console Tab
2) Do a pointer down on the red square, and drag it outside it.
3) You will not see any pointerup, pointermove, or lostpointercapture event happening.
4) Drag back in the box, the lostpointercapture will fire. Pointerup is lost.

Now, in the html > body > iframe > html, disable "user-select: none" and try the steps above again. It will work as expected. Pointer Up fires again.

Now, opt out of site isolation in chrome://flags/#site-isolation-trial-opt-out and it works as well.

Something is happening to user-select for site isolation in M70+