This behavior has been resolved and deployed to the production environment as of 3/11/25
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For teachers who are running into this issue, they can re-name the files on their computer to remove the # or ' then re-upload and re-embed the files and they should display successfully (re-uploading with the # still in the name will allow the file to display for a few seconds / until they refresh the page)
Prerequisites: A course
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Upload an image to the course files from your computer with a # in the file name.
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Create a new quiz.
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Add a question to the quiz with the image embedded in the question text (Insert > Image > Course Images > select image).
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Refresh the page and notice the image is showing as broken.
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Note: you may need to wait a little bit before refreshing as you have to wait for the link in the be updated to the new inst-fs style of links which occurs in a background job.
Known issues indicate notable behaviors that have been escalated to the Canvas engineering team. Known issues are not a guarantee for an immediate resolution. This document is for informational purposes only and does not replace the Support process. If you are encountering the behavior outlined in this document, please ensure you have submitted a Support case (per your institution's escalation process) so Canvas Support can adequately gauge the overall customer impact and prioritize appropriately.