Crop options is grayed out when editing multi layer photoshop file

If you do not need artboards, then the Crop tool will work again if you do this one thing:

Select one or more artboards in the Layers panel, and choose Layer > Ungroup Artboards.

The selected artboards will be converted back to layers.

One thing I noticed if I convert this photoshop file to jpg then crop tool works fine

By @Ignas31899439pqi2

That is because the JPEG format doesn’t support layers or artboards, so the layers and artboards are converted to a single image of pixels as a side effect of converting to JPEG. With the artboards converted, the Crop tool works again. But the Ungroup Artboards command accomplishes the same thing more directly, without losing layers and reducing image quality through a JPEG conversion, so Ungroup Artboards is a less destructive and higher quality solution.

Hey @Ignas31899439pqi2. Welcome to the Photoshop Community. I'll clarify this for you.

Thanks for sharing the screenshot. Traditional crops won't work when you're working on an artboard. It is explained here: https://community.adobe.com/t5/photoshop-ecosystem-bugs/p-artboards-and-cropping/idi-p/12250871

You can convert target layers into smart objects and save crop changes to the smart objects, which would be reflected in the original artboard. Please check this to learn more: https://helpx.adobe.com/photoshop/how-to/photoshop-linked-smart-objects.html

Let me know if this helps. Thanks!
Sameer K