The existence of status competition doesn't seem like much of an obstacle to this outcome. People at the bottom of the status hierarchy will drop out to live in simulations that give them what they wanted but couldn't get from life. After a while, they'd likely choose to suppress their memories of ever having existed outside the simulation - there's nobody in the experience machine that'll judge you for doing it. With those people gone, the people immediately above them now occupy that bottom level, and the cycle repeats.

Whoever is in charge could try to drag those people back into the real world by force, but it's hard to imagine GPT 12.2 Polaris or Claude 9 Cinematic Universe giving that the green light. The Status Game will end with a single, final winner.