ACF apparently expands shortcodes before returning content, which means if you attempt to run it through the_content filter, any line breaks will get hit by wpautop. We fought and fought and fought, moving filter orders around, removing filters, etc., and finally decided to not fight WordPress, but instead change Gravity Forms.

Below is a simple filter that collapses all whitespace including line breaks, tabs and regular spaces, and just replaces it with a single space. This should preserve whatever Gravity Forms is doing, and also address WordPress’s later escaping.

add_filter(
    "gform_shortcode_form",
    static function ($shortcode_string, $attributes, $content) {
        return trim(preg_replace('/\s+/', ' ', $shortcode_string));
    },
    10,
    3
);