I've seen a few threads related to this, so forgive me, but I need to elevate this issue. Since upgrading from ArcPro 2.9.6 to 3.1.2, DGN's are no longer honoring their native coordinate system. I've tried defining the drawing's projection with Toolbox as well as renaming a .PRJ with the drawing name. No luck. Are there any known fixes for this bug?
BUG-000158399 for ArcGIS Pro (esri.com)
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@APYahoo Most likely this is due to BUG-000158399 for ArcGIS Pro (esri.com) as noted by @DanPatterson
Good news is ArcGIS Pro 3.1 Patch 3 (3.1.3) has the fix.