1) Because it was just one weekend of work. Not everyone might continue working on/at the startup after the initial weekend. Would be weird if a fifth of your startup is owned by some guy who helped out one weekend, even if that weekend was the very first weekend. 2) They totally could, and Bobby did, right? There is the question of IP though. What parts of the IP are of Billy's LLC? I'd agree that the code made that weekend is not, it's bound under whatever the team agreed to. But the idea of the company might really be Billy's, even if that conflicts with the competitions rules or spirit a judge would still have to rule on that.

Dick move by Billy, but the end result is only a wasted weekend.