Wine prefixes do require symbolic links.
A workaround to this is to move the game to a steam library on a native linux filesystem. AFAIK proton installs itself in the same steam library the game is at.
If moving to an NTFS filesystem is a more desirable alternative, there is also a workaround(though it appears to be unsupported by valve): https://github.com/ValveSoftware/Proton/issues/82#issuecomment-415099440
I also encountered this. At the very least I wish the steam client would notify where the error log is to investigate. I had to do some searching to find it.
My solution is moving the games back onto the local drive, reformatting the USB 3.0 drive to NTFS, and copy back. Since both are flash-based storage it was fast.
I have installed games on an exFAT-formatted HDD.
But when I try to start the game, I receive a following error.
It might be happened because exFAT doesn't support symbolic links.