The Mystery Variant system only pulls from a specific pool of eligible Rare variants. If you already own everything in that pool (even if there are other Rare variants in the game you don’t have), the system will give an unowned avatar instead, that’s the fallback behavior and it’s working as intended.

To shed some light on how PMVs work:
Every 9 Premium Mystery Variants opened will reward the following (not necessarily in this order):
6 Rare Variants
3 Super-rare Variants

Additionally:
If there are no eligible Rare variants to reward, any Rare pull instead rewards an eligible, unowned Avatar.
If there are no eligible Super-rare variants to reward, any Super-rare pull instead rewards eligible, unowned Avatar.
If there are no eligible Avatars to award, any Avatar pull instead rewards 310 random Boosters.