A story driven tournament without a predetermined victor would not only be fun from my perspective but inviting to the rest of the guild as well.

We label the tournament as the start of a change in the arena, newbie friendly, none of the matches are ranked, someone establishes lore and a character sheet for the tourney, and promote it as something educational than the usual winner get's instant gratification, bragging rights, and hate from all those they defeated. 

From there, you randomize the entrants against one another and they fight until they naturally come to a disagreement and need a judge. The judge then determines the outcome, explains why, and shares what could have been done better. The players should be reminded that winning doesn't mean anything in this tournament, even if you come out on top, you're still going to be offered advice.

The thing that will probably never change is the participant disagreeing with the judge's ruling. That's where the toxicity comes from if any of us were confused or blinded to it.