I think they should ban consoles, ban the associated accounts (forfeiting any digital purchases), ban any other accounts that were on the console that was banned, if it was a physical game ban the game cards that were used the the game being hacked, and create a category of firmware that for banned consoles that blocks the console from playing future release titles.
Go ham. Hack an online game, you have to buy a whole new console, game card and create a new account if you want to start again, and your previous console becomes worthless. Hey you'll still have a dock and joycons you can use with the new console you have to buy, not a total loss, cheater.