SharePoint Groups can be referenced by action definitions as long as the column referenced by the action also support groups. However, the user picker utilized in Email actions is not tied to a list, so it only supports the entry of individual users, not groups.
This means that when an action is defined or executed, both “All Users” and “SharePoint Group” are respected when referencing a “Person or Group” column data type, such as Assigned To or CC. For example, say a user creates a SharePoint group called “My Team” which only contains individuals from a particular team. An Assigned To column is set to reference the My Team group. When a user goes to access an action entry form that uses the Assigned To column, they will only see the people in the “My Team” group, not “All Users.”