[BUG] Official Claude Code VS Code extension incorrectly blocked with "Third-party apps now draw from your extra usage" error

Preflight Checklist

• [x] I have searched existing issues and this hasn't been reported yet
• [x] This is a single bug report (please file separate reports for different bugs)
• [x] I am using the latest version of Claude Code

What's Wrong?

Preflight Checklist

• [x] I have searched existing issues and this hasn't been reported yet
• [x] This is a single bug report
• [x] I am using the latest version of Claude Code

What's Wrong?

The official Claude Code VS Code extension (published by Anthropic) is returning a 400 invalid_request_error with the message:

"Third-party apps now draw from your extra usage, not your plan limits. We've added a $100 credit to get you started. Claim it at claude.ai/settings/usage and keep going."

This is Anthropic's own first-party extension — not a third-party harness. It should be drawing from my plan limits like Claude Code in the terminal does, per the policy announced April 4, 2026.

Steps to Reproduce

1. Install the official Claude Code VS Code extension (anthropic.claude-code)
2. Sign in with a Claude Max account
3. Submit any prompt in the Claude Code panel
4. Observe the API Error: 400 response

Expected Behavior

The extension uses my Claude Max plan allocation, identical to how Claude Code works in a standalone terminal session.

Actual Behavior

Every request fails with the "third-party apps" error, blocking all usage. The extension is completely non-functional.

Attempted Fixes (none resolved the issue)

• Updated Claude Code to latest version via npm update -g @anthropic-ai/claude-code
• Ran /logout then /login to re-authenticate
• Claimed the one-time extra usage credit at claude.ai/settings/usage
• Enabled extra usage in account settings
• Set an API key directly via claude config set --global apiKey

<img width="1982" height="516" alt="Image" src="https://github.com/user-attachments/assets/8bc2a177-02a0-4cc7-9c80-e6c817dedec2" />

Environment

• Claude Code version: v2.1.1 (also reproduced after update)
• OS: Windows
• VS Code version: [your version]
• Plan: Claude Max
• Model: claude-opus-4-6
• Auth method: Claude.ai OAuth (subscription login)

Request IDs from error

• req_011CZqgNhfqnAeSTeUfNLFR
• req_011CZqgPre8BHY7MvncnxfBL

Additional Notes

The April 4 policy announcement explicitly states Claude Code is a first-party product exempt from the third-party harness restrictions. The VS Code extension appears to be misidentified server-side as a third-party app. Other users are likely affected but may be silently paying from their extra usage credit without realizing it.

What Should Happen?

it should work.

Error Messages/Logs

Steps to Reproduce

use visual studio claude code.

Claude Model

None

Is this a regression?

Yes, this worked in a previous version

Last Working Version

_No response_

Claude Code Version

Claude Code v2.1.1

Platform

Anthropic API

Operating System

Windows

Terminal/Shell

Windows Terminal

Additional Information

_No response_