I also had the same problem when I was trying to run bin/rails db:create. It took me hours trying to figure out the problem and yet it was an easy fix. I am using Visual Studio Code as my editor.
My solution
To solve this, I navigated to the ruby file located in the bin folder(bin/rails). At the bottom of the Visual Studio Code editor(status bar), you should be able to see a button CRLF(control character). Click on it and change it to LF.
Reason for the error message
This is because Windows by default uses the CRLF control character and now that you are using a Windows subsystem for Linux, the control character should be LF
I hope this helps anyone out there.