Looks like awscli v2 requires some parameters be base64-encoded.

By default, the AWS CLI version 2 now passes all binary input and binary output parameters as base64-encoded strings. A parameter that requires binary input has its type specified as blob (binary large object) in the documentation.

The payload parameter to lamba invoke is one of these blob types that must be base64-encoded.

--payload (blob) The JSON that you want to provide to your Lambda function as input.

One solution is to use openssl base64 to encode your payload.

echo '{"key": "test"}' > clear_payload  
openssl base64 -out encoded_payload -in clear_payload
aws lambda invoke --function-name testsms  --invocation-type Event --payload file://~/encoded_payload response.json

As @MCI said, AWS V2 defaults to base 64 input. For your case to work, simply add a --cli-binary-format raw-in-base64-out parameter to your command, so it'd be

aws lambda invoke --function-name testsms \
    --invocation-type Event \
    --cli-binary-format raw-in-base64-out \
    --payload '{"key": "test"}' response.json

This solution worked for me and I find it simpler than having to remember/check the man page for the correct flags each time.

aws lambda invoke --function-name my_func --payload $(echo "{\"foo\":\"bar\"}" | base64) out

Firstly, a string is a valid json.

In my case I had this problem

$ aws --profile diegosasw lambda invoke --function-name lambda-dotnet-function --payload "Just Checking If Everything is OK" out

An error occurred (InvalidRequestContentException) when calling the Invoke operation: Could not parse request body into json: Could not parse payload into json: Unrecognized token 'Just': was expecting ('true', 'false' or 'null')
 at [Source: (byte[])"Just Checking If Everything is OK"; line: 1, column: 6]

and it turns out the problem was due to the AWS CLI trying to convert it to JSON. Escaping the double quotes did the trick

$ aws --profile diegosasw lambda invoke --function-name lambda-dotnet-function --payload "\"Just Checking If Everything is OK\"" out
{
    "StatusCode": 200,
    "ExecutedVersion": "$LATEST"
}

In Windows, I have tried the following, which worked for me

aws lambda invoke --function-name testsms  --invocation-type Event --cli-binary-format raw-in-base64-out --payload {\"key\": \"test\"} response.json 

Note that, added --cli-binary-format raw-in-base64-out in the command and escaped " to \" in payload