I also tested with Nvidia’s GFN, and the “S” controller connected via USB doesn’t work there either, but the “original” controller does. If I switch the “S” model to Bluetooth, it does work in Shadow. Download Afterglow for Windows 10 for Windows to with the Afterglow Configuration App, adjust lighting, vibration levels, and the Multi-Function wheels on your Afterglow Prismatic Controller for. Neither works in Shadow via USB (nor shows up as a connected controller in the Quick Menu). I’ve tested with two XBO controllers, an “original” and an “S” model.
I just verified that using a wired XBO controller with Shadow does not work, so it appears there may be a regression in the app, or some other conflict with macOS 11.2.1. However, USB device forwarding is not supposed to be needed for the supported controllers to work, and the Xbox One controllers are supported.
The option to forward USB devices appears under the “My Shadow” section of the Settings, at least in newer clients (I’m running the same macOS version as you, but with the beta client, 3.9.7.