What's the output of:
sudo libinput-list-devices

And you wouldn't happen to have the xf86 evdev driver installed as well?

(In reply to Bastien Nocera from comment #1)
> What's the output of:
> sudo libinput-list-devices

Device:           Power Button
Kernel:           /dev/input/event4
Group:            1
Seat:             seat0, default
Capabilities:     keyboard 
Tap-to-click:     n/a
Tap-and-drag:     n/a
Tap drag lock:    n/a
Left-handed:      n/a
Nat.scrolling:    n/a
Middle emulation: n/a
Calibration:      n/a
Scroll methods:   none
Click methods:    none
Disable-w-typing: n/a
Accel profiles:   n/a

Device:           Video Bus
Kernel:           /dev/input/event5
Group:            2
Seat:             seat0, default
Capabilities:     keyboard 
Tap-to-click:     n/a
Tap-and-drag:     n/a
Tap drag lock:    n/a
Left-handed:      n/a
Nat.scrolling:    n/a
Middle emulation: n/a
Calibration:      n/a
Scroll methods:   none
Click methods:    none
Disable-w-typing: n/a
Accel profiles:   n/a

Device:           Power Button
Kernel:           /dev/input/event1
Group:            3
Seat:             seat0, default
Capabilities:     keyboard 
Tap-to-click:     n/a
Tap-and-drag:     n/a
Tap drag lock:    n/a
Left-handed:      n/a
Nat.scrolling:    n/a
Middle emulation: n/a
Calibration:      n/a
Scroll methods:   none
Click methods:    none
Disable-w-typing: n/a
Accel profiles:   n/a

Device:           Sleep Button
Kernel:           /dev/input/event2
Group:            4
Seat:             seat0, default
Capabilities:     keyboard 
Tap-to-click:     n/a
Tap-and-drag:     n/a
Tap drag lock:    n/a
Left-handed:      n/a
Nat.scrolling:    n/a
Middle emulation: n/a
Calibration:      n/a
Scroll methods:   none
Click methods:    none
Disable-w-typing: n/a
Accel profiles:   n/a

Device:           Sleep Button
Kernel:           /dev/input/event3
Group:            4
Seat:             seat0, default
Capabilities:     keyboard 
Tap-to-click:     n/a
Tap-and-drag:     n/a
Tap drag lock:    n/a
Left-handed:      n/a
Nat.scrolling:    n/a
Middle emulation: n/a
Calibration:      n/a
Scroll methods:   none
Click methods:    none
Disable-w-typing: n/a
Accel profiles:   n/a

Device:           HD WebCam
Kernel:           /dev/input/event15
Group:            5
Seat:             seat0, default
Capabilities:     keyboard 
Tap-to-click:     n/a
Tap-and-drag:     n/a
Tap drag lock:    n/a
Left-handed:      n/a
Nat.scrolling:    n/a
Middle emulation: n/a
Calibration:      n/a
Scroll methods:   none
Click methods:    none
Disable-w-typing: n/a
Accel profiles:   n/a

Device:           Cypress APA Trackpad (cyapa)
Kernel:           /dev/input/event14
Group:            6
Seat:             seat0, default
Size:             87.00x47.00mm
Capabilities:     pointer 
Tap-to-click:     disabled
Tap-and-drag:     enabled
Tap drag lock:    disabled
Left-handed:      disabled
Nat.scrolling:    disabled
Middle emulation: n/a
Calibration:      n/a
Scroll methods:   *two-finger edge 
Click methods:    *button-areas clickfinger 
Disable-w-typing: enabled
Accel profiles:   none

Device:           AT Translated Set 2 keyboard
Kernel:           /dev/input/event6
Group:            7
Seat:             seat0, default
Capabilities:     keyboard 
Tap-to-click:     n/a
Tap-and-drag:     n/a
Tap drag lock:    n/a
Left-handed:      n/a
Nat.scrolling:    n/a
Middle emulation: n/a
Calibration:      n/a
Scroll methods:   none
Click methods:    none
Disable-w-typing: n/a
Accel profiles:   n/a
 
> And you wouldn't happen to have the xf86 evdev driver installed as well?

Yes, I do have the xf86 evdev driver installed. I also have the xf86 synaptics driver installed.

Either remove those, or get your distribution to ship an X configuration that doesn't trample on loading the default libinput drivers.

Device:           Cypress APA Trackpad (cyapa)
<snip>
Nat.scrolling:    disabled

The driver isn't libinput for this device, so mutter/GNOME can't apply the configuration. If you get a newer gnome-control-center with the patch from bug 764257, there will be a warning that the driver selected for the touchpad is the wrong one.

Closing as a duplicate

*** This bug has been marked as a duplicate of bug 764257 ***

Thanks. Uninstalling the synaptic drive and installing the libinput driver solves the issue. Interesting to note that libinput-list-devices shows Nat.scrolling as disabled still, but it is working properly in GNOME.