There will be arena's set in random cities of the game. They will be set up for audiences to be watching the event inside.
The contests will be set up as 1lose out, 2 lose out, and last man standing. All contests will be set up a multiples of 2, the rewards of the contest will be based on the people watching and the people who set up the contest.
Anyone who wants to watch the contest can pay a ticket price to enter and watch. Payments allow 1 hour of watching then you get TP'd to the main area of the Arena. Some contests will give in game rewards that can be chosen using the tickets.
Half of the Ticket price goes "in the pot" and the other half goes to the person, NPC, or Guild that set up the contest. All rewards are chosen by the "person" who set up the contest in the first place.