I look at it like this, without a horse in this race: some enterprising mofos are trying to create additional value for Apple's platforms, pay Apple's fees if they have to (or at least Microsoft was willing to, from what I hear they didn't expect to be shot down entirely), and Apple is saying no. No.
I mean what they're offering, at least in theory, is pretty neat, pretty compelling. Play Xbox Series whatever games, but on your iPhone or iPad. Apple just says No.
Well, if Apple wants to reject the value that these enterprising mofos is trying to bring to their platforms, who is the government to tell them that they can't shoot themselves in the foot? If it causes a few people to switch to Android such as Mike over at Penny Arcade, and maybe discover that they don't need an Apple-branded phone after all, that's Apple's loss. There's been no shortage of compelling Apps and services to be had in the App Store, no shortage of money to be made there if you have something that people 1. want and 2. are willing to pay for. Companies like Uber, Lyft, Doordash, Facebook, even Google have been making bank in the last 10 years off the back of iPhone users, built up a good portion of their business around iPhone and iPad users. Apple can keep the good times flowing through their platform, tighten up on the squeeze and get out of their own way, or they can lose out on opportunities that are literally sitting right in front of them, practically begging for Apple to pick them.
The people that care, that really care, are either going to switch to Android, or purchase an extra device just for this, or iPhone users are going to not give that much of a damn and just live life as they always have: without being able to stream games. Life is tough like that.
Markets always sort crap like this out in the long run though. Give it a few years, we'll come back to this and see if it actually matters.