Licensing. We do the Leetcode interview in a controlled testing center. When you apply for a position, I look up your license number, then I know you can leetcode without wasting any of my developer resources on determining that.
Congratulations, you are now a "Certified Leetcoder (tm)". :-(
Seriously: what a lot of people write down here is that a lot of programming jobs don't involve code puzzle skills, but are often rather about putting stuff/APIs together in the currently fashionable framework.
This makes becoming a Certified Leetcoder (tm) just another useless hoop to jump through.
(Just to be clear: for those few programming jobs that demand the employee to solve algorithmic puzzles regularly, doing them in a job interview makes sense. But these jobs are rare.)
And this differs from the status quo how? Employers obviously find value in this signal for better or worse. We’re just making it so it only needs to be done once, by trained proctors, instead of for every position you apply for.
I've considered something like that for my current company, which is doing basically the same thing, but:
(a) this has not, in practice, been a problem for us in identifying good candidates
and, far less importantly:
(b) you need very high scale to have interviewers everywhere that candidates are OR you're paying extra for a third-party controlled environment
(c) scheduling and cancellations become more difficult and costly respectively