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You can refuse for any reason - except those involving discrimination against a protected class. Sexual orientation is supposed to be a protected class. You can still discriminate, you just have to give another/no reason and make sure it doesn't look like you're doing it for a prohibited reason.
If I wanted to say that no people with glasses were allowed to shop in my store, that would be allowed. If I wanted to say that no pregnant women could shop in my store, that wouldn't be allowed. If it was a pregnant woman wearing glasses, I could claim the first reason, but then, if I was found to be allowing other people with glasses to shop, my reasoning would be challenged and I would have to demonstrate that I wasn't discriminating because of pregnancy.
At least, this is how discrimination laws are supposed to work.
It turns out that anti-discrimination laws in the US are actually very weak and not fully defined, allowing bullshit like this to seep out of judge's mouths and through the cracks. The Equal Protections Clause of the 14th Amendment only grants equality under law, so it only really affects governments. The Civil Rights Act extends this out to private employment under Title VII, but not much further.
What the 303 Creative v. Elenis ruling (the Supreme Court ruling that led to the settlement here) does, in theory, is allow any private person the right to discriminate against any protected class (eg pregnancy, disability, and all the others) so long as the person they're discriminating against isn't an employee. This is clearly bullshit, and I'm sure if people started discriminating against Christians they'd be up in arms.
Thankfully, this settlement does not in any way strengthen this ruling, it only gives one asshole permission by one state - there is no ruling here, just an out of court settlement, thus it does not extend to anyone else. In particular, the state probably thought that because there was no injured party actually being discriminated against there wasn't much point wasting time and money litigating.
Obligatory IANAL.
Your comment should be an article. Excellent clarifications.
Thanks. I think my other comment made soon after gave a bit better detail on the laws: