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I don't understand. There's no competition to be had in this space. The people who play your game are the ones who'd be generating the content; those who make stuff for Minecraft or whatever can't be competed over because they already don't play League.
I don't know what alternate reality these people live in where offering their players the opportunity to contribute is some secret sauce that would put them in direct competition with other tech giants.
There's little business sense to make it exclusively for the current player base. You'd be risking wringing your customers dry. It HAS to attract new players and thus new income sources. If they can't compete, then it's not worth the time and money to create and maintain those tools. You compete with other companies in a space purely by investing your time and money in that space because anything spent is expected to eventually turn a profit.
Wringing them dry of what?
If they don't think their community would create items that other players want to buy, that's a different thing. The players and creators are already invested in their game; they have a playerbase of millions. Hand picking a few community created things to resell to their customers in the same vein as Valve with CS2 and TF2, or Epic with Fortnite, doesn't make them competitors any more than they already are.
They've admitted they have a problem with getting new players so everything they do needs to somehow draw in new players. Getting their current playerbase to create and buy/sell isn't enough of a reason to create such tools especially if they don't think they can match the experience of the other platforms, hence the technological competition. They need to be able to provide excellent tools and an excellent way to host and share creations to draw in creatives who could become new players.
That's a nonsense reason to ignore community creations. New players aren't drawn to games because of whether the community is making things; they're drawn because there are fun things in the game, regardless of where exactly they come from. That the community was allowed to contribute is not what drew so many people to Fortnite or Minecraft. Cosmetics make a lot of money, and mods can help with player retention as people get bored of vanilla, but they still need to be drawn in by the base game. That goes for Fortnite as much as it does League.
Besides, creators aren't generally drawn to making things for a game solely based on the tools available for doing so; they do it because they like the game. Even if that were the case, creators aren't a big group of people, nowhere near enough to move the needle on "having enough new players." That isn't part of the calculus Epic did when deciding support them, and it shouldn't be for Riot either.
Attempting to include community content doesn't put Riot in competition with other studios any more than they already are. Again, if they don't think their existing, massive community can make interesting content, that's one argument for not putting resources into it, but avoiding it because they think they'd have to draw people from other studios' communities is silly.
It would be competing with DOTA in that regard