This Set-Cookie was blocked because its Domain attribute is invalid with regards to the current host URL

I am trying to use Sanctum. React frontend is separate and served from localhost and the Laravel API is served from api.localhost (edited in the nginx config file)

Now I try to send request to the /sanctum/csrf-cookie and get the following error in the response headers for the XSRF-TOKEN Set-Cookie attempt:

This Set-Cookie was blocked because its Domain attribute is invalid with regards to the current host URL

The page I'm calling /sanctum/csrf-cookie from is http://localhost/register.

This is how the response header for the XSRF token looks like:

Set-Cookie: XSRF-TOKEN=long-encrypyed-value; expires=Thu, 09-Sep-2021 11:18:25 GMT; Max-Age=7200; path=/; domain=.localhost; samesite=lax

EDIT: Could the issue be because localhost is actually not a valid domain for this?

you can see the domain is .localhost because I set it as SESSION_DOMAIN=.localhost in the .env file..

But nothing works!