I've always thought the simpliest solution would have been.
Keep bronze, silver, gold, etc districts
Debuff players that drop into lower level districts. For example
Gold Player1 goes to silver district
Player1 does 20% less damage
Player1 take 20% more damage
Gold Player2 goes to bronze district
Player2 does 40% less damage
Player2 takes 40% more damage
The exact percentages are just an example, but could be tweaked but damage reduction and damage taken percent should stay equal to each other. The penalties should be higher the more disparity in their rank vs the district they joined.
This makes it so that the if a gold player in bronze runs into another gold player. The fight between them would still be like it was in a gold district. However, a bronze player vs the gold, the bronze would have a nice handicap to work with.
