Actually, the use case I documented here does not work when $COMMAND has whitespaces.

In this documented example I get an error .. msg="fork/exec bundle exec lolcat.rb: no such file or directory"

The ${COMMAND} needs to be unquoted. However, this also means that the current shell will interpret any whitespaces before nightwatch has a change to even read the args?

It would be neat to be able to provide the whole command in the same way ssh accepts a command: as a single-quoted string which is not parsed by the shell before calling nightwatch.

Ie.
Instead of
nightwatch --dir ls -l /tmp

accept a single-quoted string which is not interpreted before calling nightwatch:
nightwatch --dir -- 'ls -l /tmp $1 "white space"'