I would not just default to exfat because it is “newer,” it does have compatibility issues on non-windows systems. The implementations differ wildly.
Veracrypt. Make a file on your disk.
Don’t want a storage file?
Make 2 partitions, put veracrypt portable exe on the first normal storage partition. (fat32 is likely ideal here) Second partition formatted with veracrypt.
If you wanted to go overboard, don’t even make the server accessible publicly. Distribute keys to a Wireguard network that is accessible publicly. Mandate your players obtain keys from you to play.