For me it does raise a few questions: What happens to teams who lose a competition? If their only monetary incentive is the govt prize, are they then in the hole financially? Can non winning projects incentivized by govt xprizes always be repurposed to still have value? Will individuals burn out or be emotionally drained and forfeit future competitions?
This is not to say that the idea isn’t interesting; clearly x prizes are still ongoing and there’s never a shortage of interest to participate.