We are trying to setup Kafka instance in our Pega 8.6 server in kubernetes. We are not using SSL configuration, and we are passing the following in the kafka client JAAS config file, which is kept in the designated folder and the jvm arguments are updated as -Djava.security.auth.login.config="/<FOLDER NAME>/jaas.conf"
I had the same issue, can you try including username and password values in single quotes and on the same line. you can use the below settings. make sure there are no extra spaces or new lines. this resolved the issue for me in 8.7.4 pega cloud.