Speaking from my experience as a trader from Localbitcoins, the main reason is probably because it is intrinsically difficult for the support to solve any dispute. The problem with gift card is that the seller could give the trader an used gift card and try to pass it off as legitimate. Due to the structure of the various sites, it is not possible for the gift card to be tracked and thus it is difficult to see who is telling the truth. It's more likely due to the hassle of managing such issues rather than its legitimacy. I've bought tons of gift card from there for personal use and I've never experienced any problems after redeeming them.
Exactly. That coupled with the fact that gift cards were always a high risk payment method probably prompted the change. Besides, AFAIK there's a lot more deals for selling/buying gift cards on LBC's main competitor Paxful (especially for anonymous deals) than LBC themselves.
Though, does anyone know if this is just a removal of a category of payments on Localbitcoins, or an outright ban on trading GCs?
If it's just removing the gift card category, then people are technically still able to trade gift cards under categories like "other online payments", or locally, through the platform. If it's an outright ban, how do they plan on enforcing it?
As you mentioned people will still try to trade cards under online and locally category , do u think LBC which ban such payment modes will encourage the trader or advertiser, i dont think so , they have a fair chance to suspend account (just my understanding.) So ideally people will switch to some other paltforms.