I'm on disc 3 after you get the Ragnarok and you're able to travel the world. I go into Balamb Garden and talk to the Jack guy near the directory but he doesn't try to challenge me he just asks me if the CC group has challeged me yet or something like that. Was I supposed to do this quest earlier in the game or do I need to do something first to trigger it?
It can still be done. The reason he isn't playing with you though is because you haven't played enough games within Balamb Garden. Go around to regular players who will accept and play about 15 games, save ,and try him again to see if he'll allow you to play him.
Also, the first time you challenge him even if you have played the correct amount of games, he'll still only talk about the CC Group. You'll have to challenge him a second time after that to get him to play you if you've played enough games inside Garden.