"Edit in Photoshop" Bypasses Camera Raw (ACR)

When I select File>Edit in Photoshop I expect Lightroom to open the file in ACR first. Instead it opens the file in Photoshop as a .tiff and as a background layer.

I want to use ACR so the file would open Smart Object layer and revisit my edits while editing in Photoshop, if needed.

If I use Bridge, I can open the file in ACR but this adds more steps to my workflow.

I thought I was able to do this in the past. Why won't Lightroom open the ACR window?