This could still work with NFTs though, for example MTG has different formats of their game which have restrictions about which releases of cards are eligible f

This could still work with NFTs though, for example MTG has different formats of their game which have restrictions about which releases of cards are eligible for use, and some cards are banned from use in any format because they are too overpowered. Similarly, we could have games which ban NFTs which are overpowered turning them into collectibles with no in-game use. This isn't the reason NFTs aren't workable, because even if you could overcome the regulatory burdens, the bigger reason is control of IP. If other games can consume the NFTs from my game, then they can steal my player base by essentially forking the game with the promise of maintaining player inventories. Why would a publisher want this?