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In the Wheel Of Time series the Aei Sedia (a guild of sanctioned magic users) are bound always tell the truth via magical means. This is ostensibly done to convince non-magic users to trust them but in practice it has the opposite effect because due to this binding members of the Aei Sedia often become quite adept at word-games, lies by omission/implication, and using nitpicky technicalities to get around their "limitation". Of course, the normies notice this tendency and naturally come to trust the Aei Sedia even less.

Reading this along with Bounded Distrust I find myself wondering if Scott is being purposely obtuse as a means of currying favor with his ingroup (wealthy bay-area progressives), or genuinely doesn't grasp the above dynamic.

Have you read Pact and/or Pale? Same limitation on magic users and magic creatures. Pretty much the same result, too, other than there is no issues with normies distrusting magic users because they do not know of them.

I started Pact but never finished it. Got about 100,000 words in and realized that I didn't really care about any of the characters or the world being crafted.

Pact, I think, was definitively the low point of wildbow's oeuvre, but he does have a certain signature trope that makes it particularly hard to care for his protagonists. (I read through all of Worm and Pact, and got pretty far through Twig whose worldbuilding I loved but which made me do a hard "not this shit again" drop when the trope in question reared its head again. It would probably be good if it's the first of his stories you read.)

(I'm talking about how his protagonists inevitably slide into inhumanity and outright non-sapience over the course of the plot.)

I'm talking about

@HlynkaGC, too.

Pale is doing a very good job of not taking that path, even while laying out why it might be a desirable option for some of the protagonists.