Description
Multipoint features are invalid when the Feature Envelope To Polygon tool's Create multipart features parameter is unchecked. Using this option for a multipoint feature class means that each part (or point) in the multipart would be given its own envelope. Since the envelope of a point has no area, using this option would not return any meaningful information and is restricted.
Solution
When using multipoint features, check the Feature Envelope To Polygon tool's Create multipart features parameter check box to generate envelopes.