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Think i finally found why it is mandatory

Controller recognition: This works in junction with identity. Each controller is bound to the player holding it. There was a question asked about removal of the LED rings and not being able to tell who is player X. It doesn’t matter which controller you are using. The console handles it and recognizes where you and your friends are in the room and adjusts accordingly. We can even tell when one person is holding more than one controller.

So it sounds like its needed so you know whos which player as the pad doesnt a pad number anymore.