Had a similar issue on PS4, caused by two issues, but managed to find workarounds to both. The first was a PS4 UI issue (posted below in case it's helpful), and the second is a potential bug in the game (posted below in detail).
First issue: Related to PS4 UI confusion over which user has which controller assigned
When when trying to start a split screen game on the PS4, we were getting the following error when trying to add a second controller:
"P2 DEVICE IN USE. The selected device is already in use by Player 1. Please attempt to connect a different device."
We realised that our first logged-in user had both controllers assigned to them. We fixed this by restarting the PS4, logging back in as the first user, then pressing the playstation button on the second controller and logging in as the second user. The UI on the login screen then showed a little black gamepad icon assigned to each user, instead of two gamepad icons assigned to one user.
Second issue: Possible bug in game
1. A detailed description of the issue. Please include any error codes here.
When trying to start a split screen game on the PS4, we are unable to connect the second controller. There is no error message - the game simply refuses to acknowledge any button press on the second controller (except for the Playstation button).
This happens when the first controller used is a PS4 original Dualshock controller, and the second that is being added as P2 in split screen is a Logitech G29 wheel.
It does NOT happen when you reverse the order - when the first controller is the Logitech G29, and the second is the Dualshock. In this order, the game picks up the second controller and split screen mode works.
2. What version of the game you are using (Shown on the start screen in the bottom left corner of the screen)
1.03
3. Game-mode?
Split screen
4. What are your replication numbers? Minimum test attempts are 4. Please also add EXACT replication steps for us to try too.
- Start PS4 with a Logitech G29 wheel attached by USB.
- Log onto PS4 with DUALSHOCK controller (user 1).
- Press PS button on G29, and log onto PS4 with a separate user account (user 2).
- Press PS button on DUALSHOCK (user 1).
- Start game.
- Start split screen mode. See message saying "P2 ADD PLAYER. Add Player 2 to Splitscreen. Press OPTIONS to Enter."
- Press option button on second controller (Logitech G29 wheel).
- Nothing happens.
4 replications attempted.
5. What troubleshooting have you attempted? Please always try to attempt to fix the issue
Process works when order of controllers added is reversed - i.e. when user 1 uses the G29 and user 2 uses the DUALSHOCK.
6. What peripherals are you are using (gamepad, wheel make & model etc)
Dualshock PS4 controller
Logitech G29 wheel
7. Any screenshots or video of the issue? If the video is long, please include a timestamp for when the issue appears.
n/a
Hope this is helpful!