It's not. It mitigates their risk of bitcoin skyrocketing and it mitigates your risk of bitcoin crashing while you develop. But I'm glad to less and less hear this critic whenever shops offer stuff in bitcoin priced in USD.

It makes sense. The payoffs are going to show up on Coinbase's balance sheet in USD, and they don't want to commit to buying $X BTC if the market changes.

On the flip side, if BTC crashes, this is good for participants.

They could just convert the prize money to BTC today, advertise it in that currency, and not have to worry how the market changes?

Problem there is that you're exposing the participants to volatility risk. if btc drops in price then people might be less likely to participate. Many view bitcoin as a great new technology but its price is still too unstable to actually quote products/prices/prices in. Quote in dollars, delivery bitcoin and everyone wins

I guess I imagined that being exposed to volatility risk is something that anyone involved in Bitcoin came to terms with a long time ago.

Yes, but the smart ones learned to minimize their exposure.

To be paid in Bitcoin.