It is not allowed to publish an app from VSCode into a sandbox environment when the app is an AppSource (published in Global scope).

When publishing an app from VSCode into a sandbox environment, you need to un-install the app via the client (Extension Management). Then you are able to publish the app into Dev scope.

We want the sandbox apps in Dev scope by default to speed-up app development.

Maybe with a setting in the app.json file: "publishIntoDevScopeInSandbox": true