Rule #1: Don't Tell Mrs. Claus!Seriously, if she found out this whole thing would be shut down. Don't be "that guy".
Rule #2: Don't hurt spectators!The arena is surrounded by a gaggle of elves, interested to see what happens. Don't hurt them, seriously. Show restraint.
Rule #2b: Don't break the workshop!This addendum should be obvious, but seriously, don't.
Rule #2c: Defeated elves count as spectators.Once they're down, they're out. No need to hurt them more.
Rule #3: Don't take unauthorized gifts.You get one Gift when you enter and can take another when you take down a fellow competitor, but don't steal gifts when you enter. That's just unfair to people playing the game like it's supposed to be played.
Rule #4: Once in the arena, stay in the arena.The area with blue carpeting and seven Christmas trees is the Arena. It is surrounded by a crowd of elves, watching in wonder. Once you leave the stone and get onto the carpet, you're stuck there. Unless you want to be a cheater, but seriously you don't want to cheat. See below.
You could also surrender, but this has never happened in recorded history.
Rule #5: No LootingOnce an elf is down, his stuff leaves with him. Taking loot before then is acceptable, taking loot they drop is acceptable, but if they are wearing it or holding it when it's time for them to be carted off, it's off limits. This goes double for personal items.
Rule #6: Respect the Judges!The Judges are Santa's guards, equally well-equipped to deal with polar bears or the new kid's mechano-eldritch abomination. They are dwarves, since they are resistant to magic and quite tough. The guards lucky enough to Judge these battles are armed and armored with gear Santa himself made, heavily trained, and ready to dish out punishment on anyone breaking the rules. Or anyone making fun of them. (Judges have +2 to all rolls and are armed with one of a battleaxe, hammer, cudgel, net, crossbow (firing blunt--but heavy and sometimes magical--bolts), or a wand. Except for the wand-users, they cannot use magic. They also can't craft stuff, but their armor renders them immune to all but the strongest attacks.)
Rule #7: Have fun.Seriously. That's what we're all here for. Don't take it too seriously.