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This dialog pops up upon running the command.

EULA Dialog

The dialog is essentially saying: "By using this software, it is the user's sole responsibility for any sensitive information provided to Microsoft and other party."

When you open Listdlls.exe directly from file explorer, it automatically runs almost infinitely without EULA pop-up confirmation. When run via CMD->CD, you get to read the EULA first before accept.

I don't understand why such tool that is suppose to run locally/offline could send sensitive data to Microsoft.

Question: Is this some sort of data exfiltration? Or Microsoft just made a generic EULA to cover Sysinterals Tools that ListDLLs happened to be included?

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This is a generic EULA for Sysinternals. According to the Microsoft Sysinternals License Terms under Data Collection, it states:

The Sysinternals tools do not collect any data.

And then, it refers to the Microsoft Privacy Statement. The Sensitive Information and Documentation sections in the online version are identical to what you have in the screen capture.

References
Sysinternals License Terms

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