That is the funny thing about laws; as long as everyone agree that A = B then it is true regardless of the facts. It's like saying King Charles the 3rd currently rule Britain; it is technically true as long everyone don't break the illusion.
The definition is that Xbox games run on "dedicated hardware". Now i haven't seen a contract of this nature myself so I wouldn't know the precise wording. But it appears the loophole is that Xbox can keep Backwards Compatibility by running all Xbox games, from Series and before, through custom chips.
But that does bring the question of what about NEW games? And that is the crazy issue. Microsoft has two choices; (1) either giving it a custom console OS that meant you need to make games compatible with it, OR (2) just make the other half of the machine a regular Windows PC that runs PC games.
Option 1: It gets them in theory, day one launch windows like PlayStation does. But at risk of pissing off 3rd parties who are not interested in porting their titles to a tiny install base.
Option 2: They had to get their third party new games when the PC version comes out. This might be a delay 3 months, 6 months, a year? While Sony get a head start every time. But it does mean full PC compatibility and thus automatically accessing all PC titles.
Option 2 seemed bad but is a lot less bad than option 1. Then again, since GTA 6 currently doesn't have a launch date for the PC version, it might mean a LONG wait for Nextbox customers and for many other future titles...