I’m not able to set a recent song I bought as a ringtone. Why not?

If you downloaded a song, and not a ringtone, you must convert it to a ringtone. Here is how to do that on a Mac→Create a ringtone of your Logic Pro or GarageBand for Mac song - Apple Support

If you don’t have a Mac you can also convert it other ways, but you will need to search the web, as it isn’t an Apple-supported feature.

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