Sounds to me like the right thing to do would be disqualify the winner and cancel the category entirely.
The artist proved that right now, AI art cannot compete.
If a horse wins an auto race, don’t give a prize to the #2 motorist.
That’s not what he proved at all. What he proved is that an actual photo can’t compete with AI. Literally, because it’s not eligible to compete in an AI contest. His photo wasn’t the best in the category, because it wasn’t in the category to begin with. It’s no different than submitting a photoshopped image in a contest for untouched photos. The disqualification was appropriate, because if he’s willing to break the rules once, he can’t be trusted to be a part of any contests going forward.
That’s not how sports work, even Motorsport has classes, often in the same race, e.g. of course LMP-3 or GT3 cannot compete with LMP-1, and the latter cannot compete with F1 (unless you’re whatever madlads made the 919 Evo at Porsche), but it’s still things people watch. Hell classic motorsport can be a ton of fun and there’s rally classes that drive in 100hp cars that make my overweight nerd heart flutter just watching them
This is more like the other way around and a car won a race against horses.