@zing no that didn't help, I even tried a factory reset and still nothing. It's almost as if theres something with emulation station because when I'm in an emulator the lights stop flashing on the encoders.

I confirm that adding the line usbhid.quirks=0x0079:0x0006:0x00000400 (for EG starts) to a Retropie build fixes the issue. I also bought a 2nd kit of joystick with Dragonrise encoder but the one from SJ@JX seems to be 2 diffrent firmwares so they both show up in controller config seperately. So 1 encoder from EG Starts and 1 from SJ@JX work in retropie. Sadly after going through the entire install process I dont feel like trying this on Recalbox for now. I'll update if I ever do try it.

@zing no that didn't help, I even tried a factory reset and still nothing. It's almost as if theres something with emulation station because when I'm in an emulator the lights stop flashing on the encoders.

I've read a post that seems to fix this problem in a retropie system.
https://retropie.org.uk/forum/topic/31488/solved-repeated-disconnect-of-zero-delay-usb-encoder-dragonrise/2

Is there a recalbox equivalent of cmdline.txt (I know it exists in /boot but seems to be different then retropi system)
I'm trying to input usbhid.quirks=0x<idVendor>:0x<idProduct>:0x00000400 at the right place for a recalbox.

hi I'm experiencing the same problem with dragonrise usb encoders. I bought a set of 2 joysticks with 1 encoder each. I can plug player 1 or player 2 seperately and they both work fine. As soon as I plug both in, the pi starts to slow down everything becomes j**ky and unsuable. I did notice that both encoders have the same joystick ID 0 GUID etc.
I have configured only player 1 with all the same button configuration.

I too have the red led on the boards start to flash when I plug both in.
All I found are old forum posts from 2016 -2017 which I think are too old to even concider.

Raspi 4 8gb ram + Recalbox v8.0 fresh install.

@Paiuli363 have you found the problem?

Thanks