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uggggh.... truly a joke. What times we live in. Literally nothing is safe from this wrong headed engineering thinking.
I think that with the preview versions of most Microsoft software you get telemetry that can't be disabled. I guess Microsoft thinks that is a fair exchange: you get free software to test early, they get test data.

The released versions have less telemetry and opt-in or out that should work.

(comment deleted)
Sigh, this again.

Microsoft is very upfront about this. Right on the download page for the nightly build is this link: https://code.visualstudio.com/license/insiders and it says

> DATA. The software may collect information about you and your use of the software, and send that to Microsoft. Microsoft may use this information to provide services and improve our products and services. For this pre-release version, users cannot opt out of data collection.

(emphasis mine)

That’s not a great example of upfront, who reads licenses or license agreements?

I’ve been using VSCode for more than a year, including pre-release versions and had no idea this was happening.

If I was asked for consent it was not very clear that keystrokes were included in the data being sent to Microsoft.

Is this GDPR compliant? I would think not, since you can’t just squirrel things away in a dense user agreement and claim you’ve met the bar.

You clearly do not use the nightly version to judge. They literally inform you this, not hidden in any TOS, like really straight up telling you you can't disable telemetry on Nightlies. They even told you that you can compile your own, which will include none of the telemetry
What the shit kind of argument is that?

No, this moving line in the sand is NOT OK, even if they grant themselves permission to do so.

"may use this information to provide services and improve our products and services" This is a bit broad though isn't it? They could argue they can use any code you enter into VSCode without paying you.
Semi-related but the new Windows update also made it impossible to disable Bing searches in the Start menu.
privacy ¯\_(ツ)_/¯
As a consumer (not businesses) You pay for Microsoft software with personal data, that has been clear for a while. See also Windows 10.