Office 365 Message Encryption protection is not available for messages sent to dynamic distribution groups. It’s all to do with rights management licensing. However, if you need to protect messages sent to dynamic distribution groups, for instance to make sure that confidential messages are inaccessible to external recipients use a sensitivity label instead and assign the special tenant-wide permission to recipients.
https://office365itpros.com/2022/01/21/irm-dynamic-distribution-group/
