The league builds a carnival-style spinning wheel loaded with punishments of wildly varying severity, and the loser spins it live at the draft party. Landing on the one mild slice is statistically possible and spiritually devastating for the audience. Re-spins can be purchased with cash contributions to the pot.
Budget note: this one costs nothing but dignity, which makes it a strong pick for leagues that would rather spend the pot on the champion than on the loser's downfall.
Seen in the wild: fantasyfootballunlimited.com · si.com