Here is a suggestion that should be easy for the devs to implement:
Leave squad arena and fleet arena to function as it does now with the choice of 3 opponents that trigger a "real" battle that affects rank and thus rewards. BUT, there is another option on the opponent choice screen to do a "practice battle" which allows the person to choose a opponent who ranks lower than them. It still uses one of your 5 free battles, or needs 50xtal refresh just like real battles, but it cannot change your rank. And because it cannot change rank, it should not block the opponent from doing a regular battle at the same time, which could prevent someone climbing before payout.
This would give some incentive to climb in ranks because you have more choice of who to practice battle against.
It potentially would cause people to use more xtals for practicing with various squads which could increase revenue. Seems like a win-win for the players and CG. I know this would also be a relatively small lift from an engineering perspective because it leverages a lot of the existing architecture while giving the players the sandbox they've been longing for.
There is likely a bit of work for the UI to allow a player to scroll through the massive list of players in their shard, which might be memory intensive - but there is something similar already on the "Ranks" tab in both Fleet and Squad arena, which only goes to 50. So maybe it loads 50 at a time, and then refreshes when you get to the end of that 50 (and it would need to show all 5 toons rather than just the lead).
Please comment and let me know if you see any major issues with this.