Versions are:
Itch 25.4.0
Butler 15.16.0
Itch Setup 1.18.0
I talked to Amos from itchio and he found a bug in desktop app. He already fixed it (how efficient!). He said this:
Build's up! They can open preferences, scroll down, check in "Components" that butler is at 15.17.0 or above (if not, click "Check for updates" and wait).
Then it should all work. Alternatively, itch checks for component updates every two hours.