Sounds like they gave up on technical interviews and hoped their reputation was enough to get people to submit work for free in the hopes of a paid position.
Fly does something similar, except they pay you for the evaluation work.
As long as they don't keep the work both sides are really throwing effort away as it should be.. One might be going into technical interviews with no prep but one threw a lot away to get to that point and potentially loses a lot in negotiation potential from doing no prep.
Fly does something similar, except they pay you for the evaluation work.