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Basically, they saw gamestop and best buy and walmart taking in lots of money from used game sales and decided that they wanted to control that income.
That's really all there is to it.

MS wanted gamestop and all those used game retailers to use their azure cloud system to control used games, wherein they would get a cut of every used game purchase. Literally the entire idea behind the x1 is to support this system. It would have been a disaster. When you think about it, it would have upped all used game prices because retailers would still want their cuts and not lose money on them, users wouldn't be able to trade on ebay etc, and it would've just thrown the whole market into chaos.