@Peel_Ya_Cap_517 is right, just had the same issue yesterday. Flip the "Dungeon Mode" section to "Veteran" in the Group tab while you're outside the arena.
Good luck!
PC NA & EU || Mammoth Guilds - Victory or Valhalla || Altmer sorcerer main
"Wood Elves aren't made of wood. Sea Elves aren't made of water. M'aiq still wonders about High Elves."
I did the same thing this last weekend . I hit vet 16 and started it on normal and I was wondering where the difficulty was at. Then I discovered my dungeon difficulty was set to normal.