Drag and drop works only if a List is already inside a folder.
Potentially related to this ticket: https://feedback.clickup.com/20-bugs/p/cant-drag-a-list-into-a-collapsed-folder
Oh no, so sorry you ran into this issue! Our engineering team is looking into a fix, and I'll update you as soon as I can.
Let me know if I can help with anything else in the meantime!