Based on your description,

Based on your description, the first suggestion I have is to close out and reboot. I’ve used Vegas for more than a decade and am using 12 currently. At times, a function here and there stops working properly and rebooting restores functionality.

Another workaround would be to move the clip to its own track and try adding the effect to the track instead of the clip. But that is a workaround. Ultimately, if it isn’t working, something is corrupted. Last resort is to reinstall the software.