[ack_complete]

Indexed color formats stopped being supported on GPUs past roughly the GeForce 3, partly due to the CLUTs being a bottleneck. This discourages their use because indexed textures have to be expanded on load to 16bpp or 32bpp vs. much more compact ~4 or 8bpp block compressed formats that can be directly consumed by the GPU. Shader-based palette expansion is unfavorable because it is incompatible with hardware bilinear/anisotropic filtering and sRGB to linear conversion.

[flohofwoe]

Tbf, you wouldn't want any linear filtering for pixel art textures anyway, and you can always implement some sort of custom filter in the pixel shader (at a cost of course, but still much cheaper than a photorealistic rendering pipeline).

Definitely might make sense IMHO since block compression artefacts usually prohibit using BCx for pixel art textures.