If you win on MTG with a cheap deck, no one is going to check your collection to see if you have spent enough money to be allowed to get the prizes or if they are going to be lowered.
This. I'm left scratching my head as to why I can't compete in a league if I'm good enough. What does collection power have to do with how good I am at competing?
I believe it has to do with adding liquidity to the game. If everyone was getting more out of it than they put in, that wouldn't be a healthy environment. A minimum power level makes sure that those earning more rewards have also contributed to the game, and the rewards they are earning. It is about the extraction of resources vs what you're putting in. More power = higher investment = higher reward tier available.