Not exactly sure what’s going on, but it seems like either this a 4.26 bug, or behaviour has changed. This setting below regarding Auto Possess AI now blocks the player controller from receiving the OnPossess event. 4.25.(1) did not have this issue, and I had a friend test in his 4.26 as well, same behaviour.
To clarify, I can possess something, just the OnPossess event does not trigger.