When I was a kid, I participated in track, and often all of the athletes got a “certificate of participation”, but only the winners (top 3 to 5 places, usually) got trophies, ribbons, or medals.
And that's the way to do it, if you want to acknowledge participation. You can do that without diminishing the value of doing well and winning.
I'm a teacher - kids know who won anyway. And a kid who did their best but didn't win, would rather be acknowledged for what they did achieve (even if it was just participating) than be part of pretending they did better than they did.
I don’t see anything wrong with that at all. As long as the winners get recognized for their achievements, there’s nothing at all wrong with acknowledging everyone else’s participation appropriately.