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It absolutely will work on a rooted device. Mine is rooted and it works fine. Also, in my experience (maybe this is just in my area) outside of the points perk, prices are the same between the app and physically at the store as I have checked out of curiosity.
I would imagine that it’s exactly because of the word you used. Fraud.
If someone is going on a chargback spree it’s going to look fraudulent from the customers end. So their would likely need to be some kind of evidence or back and forth with the credit card company. Since they are now the middle man taking money from companies and putting it back in a lowly plebs pocket.