"your refund is denied" is impossible if the return is not processed yet. Your question doesn't make sense as asked. Who is giving you this message?
If you can't transmit your tax return because Turbotax tells you it is not ready, then it is not ready. Either the state is not ready to accept returns with that type of income, because they have to update their internal systems, or Turbotax is not ready to transmit returns with that type of information, because the state forms are not finalized in the program. You can keep trying to transmit your return, but I wouldn't bother more than once a week. Turbotax only releases updates once or twice a week in most cases.
If you transmitted your return but you are getting a message from the state that processing is on hold, then the state is delaying your return because the state has to reprogram their internal systems to handle the new type of income.
Remember most of these tax computer systems go back to the 60s and 70s and are basically obsolete, except that replacing them with a brand new system would be even harder than keeping the old systems patched together with tape and string. Every time Congress or the state government changes the tax laws, or creates a new rule, that has to be studied by lawyers, an official regulation must be written and approved, then the forms and instructions need to be written and approved, then the computers have to be reprogrammed and tested to make sure that one change doesn't break 10 other things. In past years, some taxpayers have had to wait until March to be allowed to file tax returns that contain certain changed items.
