When a site is configured to only allow login from email addresses with a particular domain, the sign up screen done properly prevent creating accounts with an email address from another domain.
See the current flow here.
1. Site setting is configured to only allow email from your domain:
2. User tries to sign up with a different domain, form says email is valid:
3. User is told email from that domain not allowed after clicking Create Account
It’d be a better user experience if the client-side validation showed the problem in step 1, before the Create Account button is clicked.