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I would instantly fail it, because I'd go and solve it in some scratch file in IDE, and then paste it there.

But then someone has to watch the recording which you can speed up by say 2-4x but not much more than that. This doesn't scale. The number of terrible candidates out there who have no business being anywhere near an IDE is insane.

I'd guess you do it like bot detection.

An online coding platform is going to be all js. You can track key press and mouse events and probably get a good idea of what's obviously real and what's not.

Probably not hard to create a bot that controls your computer and makes it looks like you're typing the code in, pausing to think, going back to fix typos etc..

The arms race never stops.

Until that bot is widely available to candidates, it's not an issue.

If they built the bot themselves, they've already proven themselves to the extent that an online coding exercise would.