I'm kinda torn on the idea. I agree with both sides to the argument.
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However, the Empire is loosely based on the Roman Empire and they had gladiatorial arenas. Maybe something lore based like this could be introduced, possibly as a way of paying off debt. Or a non-lethal version for sport, like boxing is today.
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To prevent abuse, use rankings and matchmaking based on combat rating, so the computer chooses who you're up against with no exploit cheating, plus everyone being put into a kitted Viper for the duration of the fight. A level playing field so your personal skill will win or lose the match. You would have to go to a participating system/station in order to apply to join a match which could be 1v1, 2v2, etc.
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This could also be a new career for the game, 'Arena Combatant'. Would be something to distract the galaxy's populace from the drudgery of daily life!

You could also put cameras mounted on the ships which spectators could tap into the live feed to watch the matches, again going to a participating station to view.
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Hmm, now I think about it like this, it's not that bad of an idea. Just got to make sure it all fits into the lore and 'reality' of the game properly.