Right now I think our preference would be to pay out prizes in SBD. Assuming they stick around $1 in value that makes the most sense since there's no issue with conversion rates (hopefully). If it's a $1,000 tournament we would like to just pay out 1,000 SBD in prizes.
We definitely do not plan to use other cryptos or fiat, we want to keep everything in the Steem ecosystem. That being said, other people who run tournaments can pay out whatever we want, and we may also change our payouts in the future if the community wants something different!