There's nothing wrong with the sentence. Here, the usage of 'by' can be interpreted as 'not later than' or to an extend, 'before' or 'on or before'.

Note: You must redeem your free Psychonauts key by 10AM Pacific on Saturday, September 30th, 2017!

Try reading the modified sentence and see if it makes more sense.

Note: You must redeem your free Psychonauts key before 10AM Pacific on Saturday, September 30th, 2017!

More examples:

Teacher: I would like you to submit your assignments by this Friday.

This means that the teacher expects everybody to submit their work within the coming Friday.

Note

An argument is bound to arise on the inclusion of Friday in the above example. That is a new question altogether.

Teacher: I would like you to submit your assignments on or before Friday.

This sentence has more clarity on the aspect that Friday is also included in the deadline.

Update
Please refer “Within two days of the deadline” also.

There's nothing wrong with the sentence.

I'll split the sentence into two parts,

1. You must redeem your free Psychonauts key by 10AM.
2. You must redeem your free Psychonauts key by September 30th, 2017!

Two distinctly clear sentences, no confusions whatsoever.

Now the tricky part is when both of them are combined and when the punctuation comes into play.

The comma (,) is what brings about the maximum confusion in interpretation, for many people.

To bring about more clarity in the sentence, I'll restructure it as:

You must redeem your free Psychonauts key by 10AM, September 30th, which is a Saturday.

Now, what do I get from this sentence? September 30th, which is a Saturday, is the last day to redeem the free ticket, and I have to get it before 10AM, the very same day.

There are many ways to restructure the sentence, but the original sentence is perfect.

Try reading it out loud:

"You must redeem your free Psychonauts key by 10AM Pacific" (break) "on Saturday," (break) "September 30th, 2017!"

There's nothing wrong with the sentence. Here, the usage of 'by' can be interpreted as 'not later than' or to an extend, 'before'.

Note: You must redeem your free Psychonauts key by 10AM Pacific on Saturday, September 30th, 2017!

Try reading the modified sentence and see if it makes more sense.

Note: You must redeem your free Psychonauts key before 10AM Pacific on Saturday, September 30th, 2017!

More examples:

Teacher: I would like you to submit your assignments by this Friday.

This means that the teacher expects everybody to submit their work within the coming Friday.

Note

An argument is bound to arise on the inclusion of Friday in the above example. That is a new question altogether. But it was posted earlier by someone else. I shall dig up that post and edit in the links.

Update
Please refer “Within two days of the deadline” also.

There's nothing wrong with the sentence. Here, the usage of 'by' can be interpreted as 'not later than' or to an extend, 'before' or 'on or before'.

Note: You must redeem your free Psychonauts key by 10AM Pacific on Saturday, September 30th, 2017!

Try reading the modified sentence and see if it makes more sense.

Note: You must redeem your free Psychonauts key before 10AM Pacific on Saturday, September 30th, 2017!

More examples:

Teacher: I would like you to submit your assignments by this Friday.

This means that the teacher expects everybody to submit their work within the coming Friday.

Note

An argument is bound to arise on the inclusion of Friday in the above example. That is a new question altogether.

Teacher: I would like you to submit your assignments on or before Friday.

This sentence has more clarity on the aspect that Friday is also included in the deadline.

Update
Please refer “Within two days of the deadline” also.