What makes you sure he was /G with a handheld? That's a pretty big assumption if all you heard was what you put in your post. Direct routings are given every day by ATC to pilots with handheld GPS who have filed something other than /G.

The conversation usually involves some version of direct routing ion a radar environment with the understanding that the aircraft is on radar, is choosing a heading based on the situational awareness being provided, and an expectation that if there is a course issue, ATC will advise.

"I have my handheld GPS onboard" is often shorthand for all that, with both the pilot and ATC aware of the requirement that GPS not be used for primary navigation.

A longer version of the conversation might be something like this real one:

ATC: Proceed direct FIXNAME
Pilot: We're VFR GPS only. It looks like a heading of 275°. Will you advise of course deviations?
ATC: Will advise. proceed direct FIXNAME on that heading.