Was able to fix with AI help, but please let me know if there is another option or a better way to achieve this.
If anyone wonders, here is the code I put in functions.php
add_filter( 'wpdm_after_prepare_package_data', 'fix_patterns_gutenberg_wpdm' );
function fix_patterns_gutenberg_wpdm( $package ) {
if ( ! empty( $package['post_content'] ) ) {
$package['post_content'] = do_blocks( $package['post_content'] );
}
// WPDM uses 'description' instead of 'post_content', so lets fix both
if ( ! empty( $package['description'] ) ) {
$package['description'] = do_blocks( $package['description'] );
}
return $package;
}