So, it does not seem like they said they couldn't give out rewards that way. So, this seems to me to be a poorly formed question.
But, the answer lies in the fact that we are not engaged in free role-playing. If we were, you'd be right, as the only rewards available would be diegetic ones. But, we are engaged in a role playing game. A properly designed game should reward the player for engaging in activity aligned with the game's design goals, and not reward behavior contrary to those goals. A poorly designed game will still reward some behaviors over others, but will do so rather arbitrarily, instead of along some intent.
Rules, being non-sentient, cannot connect with story. That makes purely diegetic rewards into GM-whim awards. At which point we can validly ask why you are using rules at all, and are not instead engaging in free role-play.