I was able to find that this is a logged bug in ArcGIS Pro, BUG-000144153 - "Hosted feature layer fields with apostrophe characters (') in the domain codes and descriptions are sorted incorrectly in ArcGIS Pro 2.8.2."
The bug documentation can be found here:
https://support.esri.com/en-us/bug/hosted-feature-layer-fields-with-apostrophe-characters-bug-000144...
There are a few listed workaround options:
Uncheck 'Show domain and subtype description' to sort the domains.
The issue does not occur when the same layers are exported to file geodatabases.
Another workaround is to remove the domain from the affected field in ArcGIS Online. Click the Data tab in the item details page, then Fields view, then click the name of the field to remove the list for. On that page, click the pencil icon to edit the current list. Within that view, there is a button to Delete List in the lower left.
In ArcGIS Pro, the Remove Domain From Field tool also removes the domain and serves as a workaround.
The bug status is "In Product Plan", so the development team is aware of the issue and it is on their list of issues to address.