So a Ponzi scheme...
This is much closer to a pyramid scheme or just a contained economy with really bad incentives
For example the Ponzi scheme version of this would be if you told people you were going to make a game with crypto as currency and told people that if they give you money to invest you will make them money in the in game currency.
You would never actually make the game or the currency, you would just keep selling the promise of making the game to more and more people and then paying out the first people with the later people's money if they decide they want out.
That would be a real Ponzi scheme. Pure cycling of investor funds with no underlying product.
If mid way through you actually decide to make the game and attempt to sell real gameplay, it's no longer a Ponzi scheme, just a shitty company. (although based on the length of the preceeding time period, it's likely what you did was still classified as a Ponzi scheme at a certain point and you still have probably broken securities laws and have liability)
Unlike Axie in which people are creating revenue in the system by buying stuff and is at least hypothetically possible to be solvent, the true Ponzi scheme by definition can never be solvent.
A Ponzi scheme "pays profits to earlier investors with funds from more recent investors"
A pyramid scheme "recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products"
According to history this is not a wise move.
But return to investors is not even the important thing, it is that normal businesses should get outside money by providing some kind of goods or services.
The problem with axies is that they claim everything is exchangeable back into money so there is essentially no “outside” money.
AFAIK, there's nothing inherently illegal about pyramid schemes, but they are often marketed in a fraudulent way.