For scene layers to draw properly across the ArcGIS system, the vertical units of the scene's vertical coordinate system must match the linear units of the scene's horizontal coordinate system.
In local scenes, this must be an exact match. For example, both must be feet. In global scenes, where the horizontal coordinate system is WGS84, the vertical units of the vertical coordinate system must be meters.
Change the vertical coordinate system to one that uses a vertical unit that matches the linear unit of the horizontal coordinate system.