#3 This is a stopgap arrangement as the Royal Rumble Winner will challenge the WWE Champion
SmackDown is in a bit of a flux right now. They have a Champion at the top of the mountain who is a heel and then they have all the potential challengers who are themselves heels except AJ Styles.
They drafted in Mustafa Ali in a way to fill that role but it seems WWE is still not convinced enough on Mustafa's progress or ability to run the main event yet and because of that they're probably looking at this feud as a stopgap arrangement until (maybe) the Royal Rumble winner (most likely a face) challenges Daniel Bryan for the title at WrestleMania 35.
If this does happen though, it could be a huge shock because Seth Rollins is the most likely candidate to win this year's Rumble, and even though WWE does pull the carpet time and again it looks highly unlikely that they'll do it this time around.