The American Kennel Club rejected mine because the domain was “too similar” to their name. I guess just because it had a “kc” in it? Completely bewildering.

I use this scheme (company@mydomain.com) and one that I remember blocking for this reason is Aliexpress/Alibaba - aliexpress@mydomain.com was rejected so I use ali@mydomain.com.

No idea what sort of security this is supposed to provide.

It happens rarely, but some only accept a very limited number of domains (ie Gmail, Outlook, etc).

They probably see it as some sort of security / anti-spam mechanism.