So... what you are saying is that ICANN/IANA should've done something similar for names that has been done for the various "private" "non-routable" ip address pools (10.x.x.x, 192.168.x.x, etc) have done since The Beginning... there needed to be some TLD that would only work for local networks and queries.
Of course, since that didn't happen all those years ago admins and amatures (and amature admins even) have been using a random mess of things, usually done by trying to ping or get a nslookup for some hopefully imaginary TLD and when it works (or rather, returns a NXDOMAIN error) they assume they can use it locally without repurcussion.
Which means there are tens, hundreds, or maybe thousands (or more!) "fake" TLDs in use out there, some hard coded into applications that are no longer supported, etc. but are still in use. Which means to try and fix it now would be pretty much near impossible.