LED's will "burn" plants with their intensity even when the actual heat isn't an issue. My guess is the light is too close. I'd move it back. It's possible the bags are retaining heat and creating a "greenhouse" micro-environment, where the temps could be well hotter than the ambient temps. I think the issue is more likely the LED's intensity, though, as "burn" is evident in the picture. I agree with removing the bag, though if they've been under it for a while do it over the course of a couple days opening them more and more over that period before removing them so the plant can adjust to the demands of a drier environment.
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That type of damage to the cotyledons won't even phase your plants if you transition them into the right environment now. It's the growing tip you should be concerned with - and also avoiding fungus like damp-off if you keep them too wet/humid for too long. A little warmer would be better than 65F, which could be remedied by a heat mat underneath them, but they should be okay at 65F. Colder increases the damp-off risk, as would nitrogen fertilizer, which they don't need yet. They also are unlikely to grow nearly as fast at 65F as they would 10F - 15F warmer. Warmth is even more important to sprouts than it is to more mature pepper plants.
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Good luck!