The bug

Pack overlays added in Java Edition 1.20.2 are ignored when uploading data packs and resource packs to a Realm. This causes those packs to break if they rely on a certain overlay to load when used in a certain version.

How to reproduce

1. Download a data pack with an overlay, for example the attached data pack
2. Add this data pack to your Realm in 1.20.2
3. In-game, throw a saddle on top of any stair block
4. Notice that the spawned pig is not invisible. This is because the effect changes were implemented using an overlay folder
5. Now try to add the same data pack to a singleplayer world in 1.20.2
6. Notice that the spawned pig is invisible, as expected.

Potential fixes

Modify the realms whitelist to allow files in overlay folders.