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So we'd like to be able to set up an external site collection and share it with specific external users. However, while testing this I noticed that an external user (with contribute access) is also able to use the "share" button to share with other external users. This is a security issue, as this site was going to be used to house contracts, etc.

Is it possible to prevent external users from sharing externally themselves?

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If external user having the "Contribute" then they can invite/share the stuff with other external users but that does not mean they can assign the permission to external users.

Whenever the contributor sends email invitations to other invitees, as an administrator of my site, I’ll receive the access request where I can change the permission level for the user, or take actions for RESEND/WITHDRAW.

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