I've heard of it, but I'm not comfortable with it.
The reg (MSB definition) talks about selling, issuing or redeeming stored value cards, not buying them. Your customer's business model did not exist at the time the reg was written. My opinion is that, as long as he stays below the $1,000 threshold, he's not an MSB. Keep in mind, even if he was an MSB, he would not be required to register if this is his only activity.
In this world you must be oh so smart or oh so pleasant. Well, for years I was smart. I recommend pleasant.