"I have not had to deal with this yet."
Don't let fancy new terminology confuse the picture. Nothing about this type of event is new.
When you get something for free or earn it, and that something can be exchanged for "real" money, that makes it taxable. If I get a gift card only for some product or discount, that isn't something I can convert to real money, but if that card can be exchanged for cash or equivalent, it is taxable. Virtual money that can be converted to real money is taxable at the time you get it.
My father called it The Christmas Turkey Rule. You hand out turkey certificate to the staff = not taxable. You hand out a Coupon good for $X of Groceries = taxable.
Rev. Rul. 59-58 states:
“It is accordingly held that the value of a turkey, ham, or other item of merchandise of similar nominal value, distributed by an employer to an employee at Christmas, or a comparable holiday, as part of a general distribution to employees engaged in the business of the employer as a means of promoting their good will, does not constitute wages subject to income tax withholding or wages for Federal Insurance Contributions Act or Federal Unemployment Tax Act purposes.”
“…The foregoing rules will not apply to distributions of cash, gift certificates, and similar items of readily convertible cash value, regardless of the amount involved.”
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"Level Up" is a gaming function, not a real life function.
