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Ask for a quick offer
I guess it depends on how bad you need the job, but that sounds like them trying to get free work out of you rather than being genuinely interested. It's up to you to decide if the gamble with your time is worth it or not.
If you've already invested some time into interviewing, you might as well ride it out. I'm fine with people needing to know how I think and how I work, and doing some sample work is generally the way to establish that. I'm sure some shops go overboard in what they expect in a trial project, but if the ask seems legit just go for it and crush it.
👆is a great way to do extra work that you'll get no credit for at best. We have portfolios, it's one of the few decent thing about this industry, you can see someone's actual past output. If a shop can't determine if they want to hire you based on your portfolio it's an indication they have no real understanding of how to evaluate talent.