I have this same problem with my 2019 MacBook Pro 16" and my 2014 iMac 5K.
2019 16” MacBook Pro
NO ADAPTERS Luna is plugged directly into the MacBook Pro
2014 iMac 5K i7 m290x
No additional monitors connected to either. No sidecar enabled, etc.
The Luna software finds each other fine over Wi-Fi.
Sometimes Luna works fine and connects on the first try.
Other times. Luna will fail with the error “ Failed to wait for Display add error" and ask me to remove and plug in the USB-C dongle again.
Removing and plugging in again and/or restarting the Luna primary software sometimes works, but usually does not fix the problem. Usually I need to restart the MacBook to get it to work again.
If it is working and I disconnect Luna by closing it on either the primary or secondary, I usually get the above error again and can only fix by restarting the primary computer.