After discussing with the snap and lxd teams, the issue is related to the profile which marks the apparmor profile as unconfined. The path forward to avoid this is to not override the lxc apparmor profile. That's what's causing the issues and not privileged setting.
After discussing with the snap and lxd teams, the issue is related to the profile which marks the apparmor profile as unconfined. The path forward to avoid this is to not override the lxc apparmor profile. That's what's causing the issues and not privileged setting.