No Fingerprint Option Offered when click on Touch ID & Password

I have a 2020 Mac. I am running Sequoia 15.6.1. I just bought a new Magic Keyboard with Touch ID capability. When I go to system settings, I scroll down to Touch ID and Password. When I click on that, I am only offered Password and Apple Watch. I am not offered an opportunity to add a fingerprint. I've tried connecting and reconnecting the keyboard. I have tried restarting the MAC and then turning off keyboard and turning it back on... and disconnect and reconnecting it. Nothing works. It just will not offer me Fingerprint Option. Help!!