MacOS does wash out SDR content in HDR mode specifically on non-Apple monitors. An HDR video playing in windowed mode will look fine but all the UI around it has black and white levels very close to grey.
Edit: to be clear, macOS itself (Cocoa elements) is all SDR content and thus washed out.
That's intended behavior for monitor limited in peak brightness
Oh, that explains why it looked so odd when I enabled HDR on my Studio.
Huh, so that’s why HDR looks like shit on my Mac Studio.
Define "washed out"?
The white and black levels of the UX are supposed to stay in SDR. That's a feature not a bug.
If you mean the interface isn't bright enough, that's intended behavior.
If the black point is somehow raised, then that's bizarre and definitely unintended behavior. And I honestly can't even imagine what could be causing that to happen. It does seem like that it would have to be a serious macOS bug.
You should post a photo of your monitor, comparing a black #000 image in Preview with a pitch-black frame from a video. People edit HDR video on Macs, and I've never heard of this happening before.