My employer's coding challenge uses replit and takes 30 minutes in which we're watching them do it (and interacting, asking them questions or prompting them with hints). It's not a hard challenge at all--one candidate who'd been grinding leetcode did it twice in the 30 minutes, with different solutions. We do the same with a system design question.
Most finish it, some don't and still get hired. It's a workalong in which we see how they approach the problem, how they discuss it with me, and what they do if they get stuck. We tell them to go ahead and google things, just tell us what they're looking for.
Over 10 years, we've got a pretty good record of hires that are smart, professional, and effective. And without specifically trying to hire for diversity, we've had a surprisingly diverse range of hires. We don't care about "culture fit", it's more like "work fit".
So I agree that the sort of code challenge where you send them away and see what they come up with is both unfair and a poor indicator. The real hiring test in an interview should be "can I work alongside this person?"