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I'd also say that this encourages people to sit on exploits instead of reporting them immediately, so they can try to submit it next time if they didn't get it, even without submission timing shenanigans.

So it may be actively encouraging the "wrong" thing as well.

That would be a different meta-game and while I didn't think deep into it, I believe the likely outcome is - people are just discouraged and won't consider submitting to kernelCTF.

Sure but basically every CTF has this kind of stuff going on