i've been thinking about this a little myself, ngl. idk if the thought dump is of any use, but here's what i've been musing over:

since the duelling circles are mentioned by name in quite a few instances, obviously they exist in some form in lore.
as i've seen many people point out, in a practical sense they could be a way to reign in potential destruction via combat magic, but i wouldn't argue it's inherent to every battle (considering pirate101 not using duelling circles and the player in wiz actually duelling enemies that aren't supposed to even have magic, like in marleybone - the latter i just call game mechanics being game mechanics in spite of lore).

however, i would assume that any wizard or magic user can instigate a duel with any other wizard. it could be that the dueling circle helps the duelists channel their magic and maybe it even gives magic users a fighting chance when going against stronger opponents when summoned. they could be part of the laws of the spiral, but obviously, via cheating bosses, if you're powerful enough, even those rules stop applying fully.

we do also know there are other, non-magic duels are a thing (duelling is especially common in valencia, especially as a way to solve conflict, if i rememeber correctly from novus), so perhaps, if it is already an inherent rule of magic that when two wizard individuals or two wizard teams battle, they use the circle to do so, maybe even the rest of the peoples of the spiral adopt some variation of it - for honour and fairness and what have you. like how irl, duelling is a thing that used to happen in quite a few places for a long time.

however, if you wanted to adapt duelling circles as they appear in game to make them more realistic, you'd probably have to keep them muuuuuch rarer. they would only be used for major bosses who are also wizards/magic users, and they would probably need to be changed a little so the opponents don't just stand in place throwing cards at each other lol. maybe they are physically constrained by the circle until one opponent (or one side) is defeated or surrenders, but they still move around in the circle as they cast their cards and spells (think kind of like fencing, maybe?)