From Google:
Cash equivalents are stored-value products such as gift certificates and gift cards. The IRS specifically defines these instruments as cash equivalents and states that their value is considered taxable income to the recipient, regardless of dollar value. (when talking about giving a GC to an employee).

So if Discover says that they do not give the 2% rebate on cash equivalents, then GCs are excluded.
The fact that it took them 1 year to discover that a person was receiving a disallowed benefit has nothing to do with their TOS.
And since, logically, it is impossible for them to claw back the already received payments, they just went the next step and shut down the transgressor's account.