I suspect a conflict or error is occurring that is breaking the WP REST API Request fetching the Connections Categories.
One way to determine this is … Hit the F12 key and then click the Console tab. Click the circle with a slash through it to clear the current browser console messages.
Toggle the “Select” panel by clicking the arrow to hide the options and then click the arrow again to show the panel. This causes WordPress to fetch the categories again. Hopefully, this will cause a message to show in the browser console that will help identify the issue.
Another place to look is to perform the same steps but with the Network tab open in the browser console (have the Fetch/XHR filter enabled). If a request returns with any status other than 200, click on it. Then, click on the Preview and Response options. There may be details here that will also help identify the issue.
Quick question. When you add a new WP Post when you open the Categories panel, do the WordPress Categories get listed, or are they also blank?