Hammer of Kamasa stuck in inventory

While playing couch co-op, after defeating Mektul both players picked the Hammer of Kamasa. Quest could not be completed by speaking to Oswald due to couch co-op multiplayer. After handing in quest as player 1 character, player 2 character still has Hammer of Kamasa in inventory. Cannot drop item or speak to Oswald to complete quest. Any help would be appreciated.

just throw it somewhere else apart from all encampment

We have the exact same problem. Player 2 does not get the hammer handed over or thrown away.