gcloud gRPC emulator fails to run - can't create or find index.yaml

I'm using gcloud node, and trying to run tests with a local datastore When I run the start command from the emulator documentation I get an error.
I run this:
gcloud beta emulators datastore start --no-legacy

This is the error:
Invalid project directory: /Users/guyr/.config/gcloud/emulators/datastore. Did you create it using 'create'?

When I run the regular emulator (without --no-legacy option) everything works fine.

gcloud beta emulators datastore start