Ah, I'm sorry, I'd misread your info.

Your container is being started just fine, and has its own devices
cgroup.

What's actually happening is that the container is not allowed to
*reset* its devices cgroup.  That is because lxc has set some device
cgroup limits, and the kernel is rightly forbidding the container from
un-setting those.

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https://bugs.launchpad.net/bugs/1582364

Title:
  Failure to reset devices.list on LXC privileged containers on Xenial

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