Worth noting they may have had to go through additional testing. When you submit an app that needs MFi hardware, they make you submit the hardware as well and test both together. They may have demanded something similar for Square.
Also worth noting that square is not drawing power, doing so might make them reject your app. Especially because this harvest method is fairly inefficient (power is being converted twice before its useful). Draw on the iphone battery may be 4x the power used.
I have no experience with the App Store approval process but it seems like this might fly. It just uses the audio jack as any custom mic/headset might; conceivably they could use valid API calls to just play or listen for sound and/or drive a constant powering voltage.