Caesar is dead, Long Live Caesar!
In an uprising that sees the death of Caesar Brutus Darkhorse, a new government arises that has no interest in operating Gladiator games for the public. Knowing how much the public has come to enjoy the games however, it is selling the arenas to private operators.
Instead of the government owning all the arenas, each arena is owned by a different person. The government is regulating the operation of the games however.
Rules covering a minimum as to how much willing combatants must be paid have been established. There are also regulations on the treatment of "Monsters" intelligent ones in particular and other aspects as well.
In arena towns, PC's can walk into an arena office and enter a "contest" similar to that of the medieval tournaments by selecting the type of opponent they want to fight and if they want to fight a "death" match which pays higher or a "subdual" match which pays lower, but guarantees that the PC will live.
Arena towns and cities also offer many things not found in other places in their effort to build a local economy based on the games. There are magic shoppes and weapons and armorers selling their services and items to "Gladiators".
PC's that want to "hunt" and live capture monsters for the matches have found a lucrative market as well. Arena owners are paying top dollar for the "best" monsters.
As expected, gambling is big in arena towns as are other related crimes. Each arena town has a thriving thieves guild.
I've even managed to turn it into a game within a game in that Players can run an arena owner as they would a PC. They start with x amount of GP to buy an arena (the government is selling off the properties at minimal prices just to shed to weight and encourage business in local markets) and to stock it. They must pay for things like putting up posters and buying monsters and paying the winners of the combats. They take in money from the gate and sell vendor licenses and even get a take of the licensed gambling.
Potential Gladiators can sign up to compete up to a week ahead of the regular "Show" and prepare or they can sign up at the last minute and do the best with what they have.
There have even been whole PC parties stop into an arena town on the way to some or from some adventure and have one of or more of the PC's sign up to compete and the rest of the party place bets on their fellow party members.
Arena towns are a great place to offload treasure and pick up supplies and other items. Gotta watch out for shady NPC's selling "magic" items out of a wagon parked behind a tavern or behind the city walls though. That +2 DragonSlayer sword may not be what they claim it to be.
As a DM, I have found adding the arena towns to my game have made my game a whole lot of fun. So much potential for role-playing and interactions in an urban/suburban setting.