Defender for SQL for on-prem Azure Arc connected SQL servers

I am having trouble using the Azure Built-In policy "Configure Arc-enabled SQL Servers with DCR Association to Microsoft Defender for SQL user-defined DCR".  I would assume a newly created DCR would work just fine, but I am unsure as when I use the policy that will automatically create a DCR and LA workspace, it works fine.

Does my DCR need to be configured with a special data source and destination? (Similarly how Azure Monitor needs a special DCR for Arc machines)