Login failed error message solved by changing /etc/hosts file

When I first started the game, despite having an internet connection, I got an error saying that login failed, the game is unable to connect to Xbox Live, and that I should restart the game with an active internet connection. It was not possible to move past this message to start the game, I wasn't able to play even single player.

After some investigating, this was because the game was looking up wpad.localdomain (Web Proxy Auto Detection), but my DNS server was not sending a response, causing a timeout. This was determined by looking at the DNS queries in Wireshark.

I solved it by adding both IPv4 and IPv6 entries for this domain to /etc/hosts

127.0.2.1 wpad.localdomain
::1 wpad.localdomain

My NetworkManager setup doesn't read this file, so this also had to be added to /etc/NetworkManager/dnsmasq.d/hosts.conf:

addn-hosts=/etc/hosts

After restarting NetworkManager, the game started working OK