After more research, I found the below forum post that appears to be my issue, I made a post in it, but someone deleted it for some reason.
The issue appears to be a launchbox controller support issue and not an Xenia issue. Since launchbox does not support SDL2, any modern bluetooth controller will stop functioning in launchbox if an emulator switches it to enhanced mode until you power cycle the controller. There should be at least some note about this somewhere as I spent several hours troubleshooting this issue.
The controller I'm using and bought for launchbox is an 8Bitdo Ultimate Bluetooth controller.
https://forums.launchbox-app.com/topic/75716-big-box-dualshock-4-issue/
