Thank you for your response. Since the VM (RDP) you are accessing does not meeting the device compliance criteria it is causing the device to fail. You may filter the VM from conditional access policy by applying either excluding specific device ID or trust type as AAD join if VM is AAD joined:
- If the VM's are hosted on Azure or host on a trusted network then you may exclude the network from CA policy.
Thanks,
Akshay Kaushik