The external developer who started the work and was highly praised by Gitlab offered to work for them if they made a team around federation --> nothing.
A group of French universities are now considering making a group in order to work on it themselves and contribute back to Gitlab.
Gitlab will most likely use it as a big selling point once all the work has been done by externals with little to no cost to Gitlab.
Not surprising at all. Federation is not a feature that their paying customers likely have much interest in… same for Gitea btw. the developers interested in forge federation AFAIK all went to Forgejo.
Personally I think Gitlab also needs a community driven fork. Maybe a more ambitious https://heptapod.net/ could be a good base to start that.