Because the swim is so short, it's unavoidable that people will be bunched up in the start of the bike. And then the bike is not long enough to spread out the packs.
In recreational races, the race organizers generally prefer to forbid drafting as a safety measure. In fact, their insurers probably mandate it. It's just dang dangerous to have a bunch of newbies trying to draft in an olympic distance race. For the pros, this is not so much of a concern.
For Age-Groupers drafting is generally (there are some out there but not many) not allowed in any triathlon even in Olympic distance triathlons.
The Elite/Pro racers on the ITU World Cup circuit are allowed to draft to make the race more spectator and TV friendly. This is also why they tend to be multi-lap courses, typically you see two lap swim (with short run in between laps), 6 to 8 laps on the bike, 4 lap run. You'll also see stadium seating near transition and the racers come through on each lap of the bike and run.
This is more security related than distance/type related. The course topography has a major part as well. If the course is more of urban type, roads/streets/pavements - drafting is more likely to be forbidden, as the chance of a crash is bigger.
There are many races of Olympic length that allow drafting.