This means you can't pass the game around to your friends or sell it afterwards, which completely ruins the purpose of physical media imo. I mostly play PC these days so this doesn't affect me, but it's a disappointing direction for console games. At least they could've used an empty disc that has proof of ownership.
I've not heard of this before, what does physical edition usually mean? I would have thought that meant it was a physical edition, so just a code would be false advertising
Nowadays even with the disc you still need to either copy the game to your console's SSD and/or download the latest patch from online service, as the optical disc reader is not fast enough. But at least the physical disc is still a (roaming) key to allow you to play the game (instead of the digital key that's tied to your account).
Also obligatory https://youtu.be/kWSIFh8ICaA
This isn't the first game to do this, usually "physical edition" means you just get a box. What's inside depends on the publisher. Usually digital-only cases have a giant warning on it that there is no CD inside.