This is very straightforward. We need to have one web2 game mode and one web3 game mode for every game the studio creates.
Limiting the access to the Ascendant Arena by needing the NFTs is bad game design. We should be limiting the access to ILV rewards not the game itself.
Not only that, having a F2P version of the game would remove the need to implement weekly free rotations of illuvials.
We let the players get hooked by trying the F2P version of the game and entice them to go P2W with the ILV rewards.
The ascendant arena would work similar to the F2P Gauntlet where having the illuvial NFT would give that illuvial a cosmetic differentiation, also showing if the player owns a holo or dark holo.