I have no problem with mods, including mods that introduce adult content.
However, I can certainly understand not wanting nude characters showing up at a public tournament that doesn’t want them there. The tournament organizers are trying to provide an experience for the players and viewers, and it’s entirely-legitimate for them to want to control that. I mean, if you’re having, say, a poker tournament, it’s entirely within reason for the organizers to say that they don’t want the players, say, stripping down in the middle of the tournament. Hell, or they could want an only nude tournament. Their experience, they’re crafting it.
However…I don’t really understand the circumstances that led to mods being a unique problem here, and the article doesn’t say.
One possibility is that the tournament organizers wanted to have nude characters involved and it’s just Capcom taking issue with having their product involved. I assume that that’s not the case here.
Another is that a player broke expectations or tournament rules by doing so. If that’s the case, okay, but I don’t see as how mods are some special or unique concern. Any tournament in sports or whatever is going to have the possibility that competitors act inappropriately relative to what the tournament wants to permit. Could be tennis players doing Hitler salutes or billiards players mooning the audience or StarCraft players using profanity in text chat. And in general, I think that the approach used there to mitigate the thing is pretty similar. You have a referee or judge who disqualifies a player, and they forfeit. The local audience is gonna see, but whatever, the same players could do so in a crowd anywhere, tournament or no. If you’re streaming to a remote audience, then you have a delay of a certain amount of time on the stream, and you give the hosts a button to cut the audio and video feed, and if you have the crew to handle it near-live, maybe do things like bleep out or black out whatever you want to censor and keep the feed going. I don’t see how mods are anything special here.