Of course they should.
But, market dominance means agreement to such terms are not 'fair'.
But once you have dominance different rules apply.
Ideally, I'd prefer that this kind of back-and-forth between developers and Apple would happen strictly through negotiation, rather than invoking the court system, but I realize that not all markets are functioning well enough for this to be practical.
Not sure what's the business model behind Apple Arcade, but it looks Apple is in a way also competing on the gaming market. From this point of view their 30% cut from competitors' sales looks a bit worse.
That is true, but I think it is debatable whether that is a reasonable way to define "market".
It would be as if a vendor wanted to sell their goods in a grocery store. The grocery store says no for some reason. The vendor disagrees and sues them, saying they have a monopoly on all grocery store sales on that particular corner.
"Wait, but there is a grocery store across the street?"
Well, in their law suite they defined market to be just that corner---they excluded the other corner where the Android grocery store is selling things.
[1] https://cdn2.unrealengine.com/apple-complaint-734589783.pdf
It certainly can be argued that they have a dominant position in a particular narrow market, and the court will look at these arguments and determine whether they do or not.