Do you know if the Lambda theme has been specifically updated for Moodle 3.7? A lot changed with themes in 3.7. Clean is deprecated and replaced with a "Classic" theme. For me, when I use Boost in my 3.5.x and 3.6.x sites, I never see an option to hide a block (like the icons you see above). I have hiding and docking enabled for blocks at the site level.
You might be interested to read this forum thread about the plan for block docking in 3.7 onwards.
My guess is that Lambda was originally based on the Clean theme (which supported the dock and block hiding), and for 3.7, the developer updated it to be based on Boost or Classic. The changelog does not specifically mention Boost or Classic around this time period, so you may want to specifically check with the developer.
https://themeforest.net/item/lambda-responsive-moodle-theme/9442816#item-description__changelog
Cheers,
Ray
https://themeforest.net/item/lambda-responsive-moodle-theme/9442816#item-description__changelog
Cheers,
Ray