Probably the best way to win is to deploy a couple dozen red balloons of your own...
Also, making the contest more hostile would arguably be very ethical given that DARPA are funding it. It would presumably provide a better research outcome if the winning method had to deal with bad actors.
It wouldn't be ludicrous, because it would force your competitors to deal with the problem of fake balloon, presumably increasing your chances of winning (assuming you have some method for determining what is a real balloon and what is a fake one)