This is still happening on Steam Beta as of posting this message.
This issue may not be isolated to Steam for Linux, I believe Steam for Windows behaves the same way as of this message
Still happening.
Is anyone ever going to implement this? It has been almost 6 years.
So when you set a Launch parameters via the GUI, the %command% works. If you launch a game via the cmdline, steam -login hi bye -applaunch 570 "primusrun %command%", you launch the game literary passing the %command% itself, not replacing it. The behavior of the cmdline and GUI should be consistent in this regard.
Relevant but not directly, https://github.com/ValveSoftware/steam-for-linux/issues/6046.