Can't Edit Category or Add Subcategories To It

That’s correct, Discourse doesn’t enumerate group memberships.

This is by design. Subcategories can’t have permissions that are less restrictive than their parents. A check was added for this during the recent betas:

:white_check_mark: Do not allow saving a category if child permissions are LESS restrictive than parent: Subcategories do not inherit permissions from parent category @maja

Source: Discourse 2.3 notes

This is why I asked:

It’s not a category creation error, you’re just using categories in a way that isn’t intended. Had you tried what I asked it would have worked.

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