Hey, so I've been able to find a solution to the issue.

First, open a PowerShell window and run

ipconfig

You'll get a list containing lots of IP Addresses divided into categories. Look for a header with a Default tag.

Now copy the IPv4 Address that's written there.

Connect to the WSA using the following code:

adb connect <Your IPv4 Address>:58526

You'll get a prompt from WSA requesting you to allow debugging. Press Accept and you're done!

Source:
https://learn.microsoft.com/en-us/windows/android/wsa/

BlockquoteGo to WSA settings Developer tab. Click on Manage developer settings which opens the Android developer options. Find USB debugging. turn it on if it was not already. If it is already on, turn it off before turning it back on.
Blockquote

Slion, I don't see any Developer tab in WSA settings. Could you please clarify how to do this action (I have the same problem of missing adp)?

Hey Andrew,

I think this problem appeared after WSA received the Android 11 update. I am facing the same issue with WSA V2206.40000.15.0.

Apparently, the developer settings has been moved to a different hamburger menu altogether, with the refresh option (to refresh the IP Address) missing. Sideloading APKs seem to be broken as of now. WSATools doesn't work due to ADB being disabled in WSA Android settings and adb connect doesn't work due to the error pointed out by OP.

Please refer to the imgur link to see what I see.

https://imgur.com/a/NJHfNbG

I'm having the exact same issue. WSA settings is saying ADB can be connected on 127.0.0.1:58526, but I can no longer connect with any of these: