1] Makes sense, just in general.

2] Makes more sense, when these cards are a part of the case they’re currently fighting in New York.

If the gift cards … stop physically existing as potential ‘money’… well then that somewhat weakens the idea that Valve is pemitting the proceeds of alleged gambling to be functionally redeemable as a valuable physical object / semi-money.

Another whole big angle of the New York AG’s case is that Valve has just known the secondary market for Steam Items and Steam Giftcards exists, and has done nothing about it.

They’ve previously countered that they take secondary markets seriously and have put a considerable deal of effort into finding and shutting those down, and well now, if they’re also just pulling the plug on physical cards, that further makes them look like they’re not just belligetently and openly refusing to comply with the law.