Currently to authenticate a custom domain in Dynamics 365 marketing a customer needs to create a DNS TXT record against the actual domain name (e.g. dynamics.example.com) ref: https://docs.microsoft.com/en-us/dynamics365/marketing/mkt-settings-authenticate-domains
DNS TXT records cannot be created if a DNS CNAME record already exists, which is a common requirement if the same hostname is used for Azure TrafficManager or Azure WebApps. This means customers cannot authorize their subdomain for Dynamics 365 pre-filled forms if the subdomain already hosts an Azure WebApp or Azure Traffic Manager.
Please consider adding a prefix in front of hostname that the customer wishes to authorize into their Dynamics tenant. For example, Azure WebApp uses the prefix ASUID to authorize a custom domain against their service to overcome the CNAME issue. Ref: https://docs.microsoft.com/en-us/Azure/app-service/app-service-web-tutorial-custom-domain?tabs=cname#4-create-the-dns-records