Jade is the stereotypical physically futanari in-universe. You don't exist in a world where futanari exist, so you're first thought when overhearing two women having sex and one talks about the other's "cock" is a strap-on. Madison does exist in a world where futanari exist, and two women are having sex, one who has the typical physique of futanari, and the other talks about her cock so her first thought is "oh, she must be a futanari". It's perfectly logical, Jade isn't the only futanari to ever exist, there's precedence for Madison to think she's a futa. It doesn't mean strap-on's don't exist, it just means Madison understands the world she lives in.