For anyone landing here and looking for a solution…
This one Docker Desktop Failed to Initialize after latest upgrade - #2 by computerbrainhead made it work.
As per the “reasons behind” there’s a cross-post to the originating issue in github issue: docker desktop failed to initialize · Issue #13025 · docker/for-win · GitHub (currently solved on Docker Desktop v4.14.0).
In the meantime, just open the .json file. Edit a line. Save. And it works! 