Well, this question is great because it goes to the heart of Canada's relations to its Aboriginal peoples. Canada's longstanding policy for most of its history, officially until about the 1970s and some would argue unofficially for even longer, was Assimilation. Assimilation was the core of the relations between the Canadian government to the Aboriginals from the very beginning. The Potlatch Ban was part of that, the idea being that the Aboriginals were engaging in lazy and stupid behaviour that held them back from acting "proper" and "healthier".

This intersected with other policies banning rituals and behaviours the Europeans disapproved of. Part of the reason was due to the beliefs of Protestants that wealth was a sign of hard work and piety, and voluntarily giving away a large portion of ones' wealth was something they found distasteful and perpetuating the "laziness" of Aboriginals. In addition, Aboriginals often worked seasonally for white employers so as to be able to purchase more expensive gifts for Potlatches, furthering white opinion of Aboriginals as "lazy" partly due to these events, instead of working all year round. This was despite the essential function potlatches played to Aboriginal communities, including including name-giving, gift-exchanges that strengthened community ties and served as a form of trade, mourning, marriage, and the succession of chiefs. John A. MacDonald, the first Prime Minister, was the one who started this policy as an amendment fo the Indian Act in 1884.

Part of the reason the act was repealed was simply that it wasn't very successful. While it did a lot of harm to Aboriginal cultural life, it didn't lead to assimilation and often instead led to acts of resistance which undermined government authority and prestige for very little reward. These and other bans, such as the ban of the Sun Dance, became seen as antiquated and old-fashioned as time went on, and Aboriginals were gaining more rights in society, although they were unable to vote until 1960. Policy began to slowly shift away from Assimilation, although this was a slow change. A similar shift can be seen in the repealing of the requirement for Aboriginals to attend Residential Schools in 1948, although Residential Schools themselves were still kept in operation for a disgustingly long time, with the last one closing in 1996.

That isn't to say that Aboriginals were treated equally or that Assimilation wasn't desirable or pushed by the Canadian government, but that there was a relaxation of some of the more Paternalist elements of Aboriginal policy. Part of this was spurred on by a Parliamentary Committee a few years earlier which had invited Aboriginals themselves to speak to Parliament and recommended the relaxation and alleviation of the worst practices towards Aboriginals. While these recommendations were not followed fully, they were an important step towards social justice towards Aboriginals in Canada, and the repeal of the Potlatch Ban and other practices is a symbol of this.

Additional Reading: While I used a few sources, I think this source is the best, despite being a government source, for a wider audience in its accessibility and summation of many of the important issues. It also covers some issues I didn't cover for fear this answer would become too long, including the pressure of Aboriginal veterans of the World Wars for rights in Canadian society, which was an important catalyst for advancement, much as the wives of soldiers helped bring about Female Suffrage in Canada: https://www.aadnc-aandc.gc.ca/eng/1307460755710/1307460872523#chp5