Update: with some exchange of messages with Trimble support I have been able to identify the issue further. It seems that when Trimble Connect knows you have a touch screen, the drag and drop gets automatically deactivated.
Since we have many laptops that now come with a touch screen by default, there are lots of users affected even if they never use the touch screen and keep using the laptop with mouse and keyboard.
Here is my observation: when I simulate a computer with a touch screen, the UI disables the drag and drop.
this goes away as soon as touch screen is added (in my case via simulation):