Guests users in SharePoint are quite common in a business setting, but their rights should be limited to the content they have created. They should not be able to share sites, folders or files they do not own, to prevent unwanted data extraction from your business.
In the Set section, you can configure one of the following options when you apply the setting:
- Enabled: Guests users will be blocked from sharing content they do not own
- Disabled: Guests users will not be blocked from sharing content they do not own
This setting is available in the Microsoft 365 SharePoint admin center, in Policies > Sharing > More external sharing settings > Allow guests to share items they don't own.
Please note that if the Disable Anonymous Sharing setting is set to "Only users in the organization", you will not be able to open the "More external sharing settings" section.
Microsoft documentation about SharePoint guest sharing: https://learn.microsoft.com/en-us/microsoft-365/solutions/microsoft-365-limit-sharing?view=o365-worldwide#sharepoint-guest-sharing