Sounds like they're basically doing KYC on gift cards, undermining your reason for using them.

We can buy them in stores for cash but that may vary by geography.

Not surprised though. Gift cards have always been a bigger avenue for money laundering than Bitcoin itself, and there have been lawsuits trying to make companies more responsible for their misuse.

I'd be wary of trading KYC'ed gift cards for sats; you may get a knock on the door if it's at all wrapped up in say, ransomware scams for a common possibility.