Hello curious7,
You can apply DLP policies to M365 groups
Can you check the below to troubleshoot the issue.
Please ensure that the M365 groups are correctly added to the policy and that there are no exclusions or conditions that might be preventing the policy from being applied.
Consider checking the Endpoint DLP Settings, especially the "Browser and Domain restrictions to sensitive data" option
also, confirm that the account creating and deploying policies has the necessary permissions.