It looks like this is an Excel problem as I can find many related articles about it. And it is not something new.
Microsoft Answers
Imagine this: You are working along just fine in Excel, then you try to make an edit to your workbook that causes a strange little error message to pop up. Now imagine that error popping up after many of your edits. Rod had that problem and is wondering why it is occurring and how he can fix it.
excelribbon.tips.net
Some of them mention that the Live View (Options->General) should be disabled.
There are others saying that another application or Excel itself currently locked the clipboard so you can only paste the copied content "inside" Excel (as it is shown in the error screenshot you pasted above).
Personally, I have always experienced trouble when I installed a newer version of the Office applications. And I am sure there are many users like me. Honestly, to clear the leftovers of the old version, I've even performed a clean OS installation in the past! (I am not suggesting doing that by the way - it is a really big hassle).
What do you see when you open Ribbon->Home->Clipboard->Open the side view (by clicking on the little icon shown in the screenshot below)? If you have the "Clear All" button enabled, then could you please try clearing the clipboard content in Excel as well?
(Unfortunately, I can't reproduce the same behavior on my side, either on Windows 10, 11, or Mac, so that's why I am asking for testing it. Thanks for testing.)