It's perfectly legal.
The law regards your wife's transaction as a 'purchase' in just the same way as if she'd bought a physical item. Instead though, she bought a service, provider the bearer of the gift card with the right to select an item worth £100. Since neither the service offered (nor any item obtained through it) was mis-represented or faulty, there is no right to a refund. (Even with a physical purchase, a shop is never obliged to offer a refund, replacement item or credit note unless the item was faulty or mis-represented or unless the shop actually offered such a refund/replacement service as part of its terms of trading).
Further, if shops allowed gift cards to be purchased (without any form of identification from the purchaser) and then converted back to cash they might well be breaking the law because such transactions can fall foul of anti-money laundering legislation.