Now everybody is going to trace images if there's another art contest lmao. So boring. =3=
But seriously, the art world would still consider this plagiarism (or unethical at least), but okay I guess haha. Like, it would be different if there wasn't a prize worth real value or if the original art was credited, but if you trace something, act like it was all your idea, and gain something that's the equivalent of real money, then that is actually fraud lol. Art classes teach not to trace or copy reference photos for good reasons.
Since the contest is so small right now, I'm sure in this case it won't matter since the original artist won't notice, and might not even care. If they were playing PKO I'm sure they would file a claim though lol. Do you know how many art sites take original artists' claims of art theft on traced art and ban people for it?
But people who aren't artists probably don't even think about it... as you can see from the comments defending the winner here haha... so maybe the person who traced and won didn't even realize. It's still fraud though since there's "financial gain" and no credit to the original artist

So I'd put no tracing in the rules if there's another contest just to be safe.