I am using macOS Ventura on a Mac Studio M2 with the Magic Keyboard with Touch ID. I am unable to activate the toggle for “Use Touch ID for purchases in iTunes Store, App Store, and Apple Books.” All the other toggles in the “Touch ID & Password” category work, but not that one. When I try to turn it on, I’m presented with a password prompt. I fill it in and submit it, but then the toggle goes off and won’t accept my attempts to turn it on. All other Touch ID-related functionality appears normal. I’ve had this problem since getting both the Mac and this keyboard last month. I haven’t had any luck in my search for similar reports. Is there something I need to do somewhere on one of my other iDevices with the same Apple ID, or some other fix I can apply?
Do you have a valid and current card in Apple Wallet on that machine?
Katie
Well, that’s another interesting thing. I saw your reply and figured that must be it. I went to add one for the Mac, and got the “Apple Pay cannot be used when automatic login is enabled” message. Then I went to “Users & Groups” to deal with that, and saw that “Automatically log in as” was already turned off because FileVault is enabled. So… ?? 
(Also, for what it’s worth, “Use Touch ID for Apple Pay” does allow me to toggle it on. Whether that affects your answer, I can’t know.)