Yes. Most airlines do the same thing.

Non-stop flights attract a pricing premium and have limited competition from other airlines. So you don't necessarily want to give away that seat as an award just in case somebody might come along and pay a premium for it. (or if they couldn't use miles would just pay for the flight with cash)

With one-stop flights, you start competing with far more airlines. Which means fares can be lower and you are more inclined to release award space.

However if you allow members to book connecting flights and then drop the connection, it would make a mockery of what revenue management is trying to accomplish. So it usually isn't allowed...