Here's the biggest problem with the idea;
While in Sportsmanship Mode (SM), you will only be matched with others opting into SM.
This is essentially a reimagining-slash-rebranding of Prisoner's Island as an opt-in experience - while still existing as a punishment.
And as it were, Riot has no interest in creating disparate matchmaking queues based on behavior.
Even beyond that, though, there are some other issues;
-No AFKing under any situation
There are (albeit rare) instances where "AFKing" - and I use the term loosely - is actually optimal. Waiting out ambient gold gain to buy your next item out is a good example, alongside waiting for neutral monster spawns (Baron, Dragon, Herald, buff camps), or even idling about in wait for the enemy to come to you, as is often the case in feigning Baron attempts.
If AFKing isn't allowed in any situation, then those tactics, which do involve AFKing for a small while, can no longer be used.
-No surrendering (it's just disabled)
You say that like Surrendering is unsportsmanlike. It isn't. If you don't want to Surrender matches, play in a full premade with people who you know share your mindset. Disabling Surrender votes entirely is more liable to increase tilt than promote a sportsmanlike atmosphere.
-No Griefing
I'm assuming that you mean "griefing" as synonymous with trolling, in which case, such a rule already exists. The first punishment for it is a 14-day suspension, followed by a permanent suspension for continued misbehavior.
-Limited # of disconnects per week
The system already has its own way of handling disconnects. They're treated with some leniency, but ultimately can result in a 20-minute low-priority queue if it's a persistent problem - whether through crappy internet connectivity or deliberate leaving.
What you will see is all the well-behaved, reasonable players flocking to the mode.
And poorly-behaved players under the mistaken assumption that they'll be more likely to get better players in SM.
And trolls who know that people in SM are more likely to lower their guard because of the assumption that SM will only have sportsmanlike players.
And poorly-behaved players who think they're sportsmanlike, and consequently get kicked out of the mode.
Just because you brand it as "a mode for sportsmanlike players" does not guarantee that only sportsmanlike players will sign on.
Folks who can't handle their attitude either don't bother to opt in or get instantly banned from the mode.
Considering that one of your criterion is - at least, I assume - trolling, that's unlikely. Trolling is difficult to detect, and it's not like having a mode designated "sportsmanship mode" is going to improve the system's ability to catch trolls.
Beyond that, you also have a criterion of "limited number of disconnects per week". Don't you think that someone will take note of how many disconnects they're allotted and just sabotage games consistently while staying within the boundaries of what's permissible in SM?
You really shouldn't be so sure that everything will go exactly as you expect it. There's a lot of room for your idea to be ruined by its own design.
Since your teammates in SM have all opted-in, the expectation is already higher and the attitudes friendlier from the start.
With a caveat; every player has their own distinct expectations, and having those expectations set higher means that there's a higher chance for things to crash and burn when one particular player's expectations aren't met.
Since you will see far fewer games resulting in losses due to poor teammates...
Case and point, there are a couple ways to interpret "poor teammates". Player A might think "poor teammates" means someone with a low KDA coming out of laning phase; Player B might think it means someone who's toxic; and Player C might think it means someone who has poor macro skills.
You can't guarantee that Sportsmanship Mode will even remotely affect any of those interpretations of "poor teammates". And if you raise expectations but then those expectations don't get met, people are gonna start getting angry because they expected more out of the mode than what they got.
...the mode will incentivize people to come, but they'll have to behave to stay. If they can't, then they can play with all the others who can't.
And again, Riot does not want something like this. From the Nexus article I linked above;
We know that most negativity in game comes from a misstep, not a commitment to ruining games for people(...)So as long as reform is a core value for us (spoiler: it will always be a core value for us), we can’t stick 10 (even occasionally) unsportsmanlike players into what would be even more unsportsmanlike games and expect them to learn and turn things around.
...
Still, because the prisoner’s island system gives up on these players by default, we can’t subscribe to it as a solution for unsportsmanlike conduct.
At the end of the day, forcing players who misbehave into a space where everyone is misbehaving isn't going to help them behave better. They're just going to get worse.
I guarantee you'll see the entire community will get better as a result.
I strongly disagree. It may turn out after some months of existence that a "Sportsmanship Mode" will in and of itself become something stable, but it is beyond a stretch to say it'd make the entire community better.
All it'd do is create a bubble for the better community members to thrive while keeping the worse community members outside the bubble - and occasionally feeding them the one-off offender who breaks the rules of "Sportsmanship Mode", turning them into toxic players in the process.
You're not suggesting a panacea, you're suggesting a quarantined haven.
Furthermore, there is no reason it would negatively affect League's sales (you don't ban people just for having a bad temper, but you disallow them access to the mode).
If toxic players are still allowed to play, then they're going to be ruining the experience for other players and consequently, negatively affecting League's sales.
If anything, it increases the player count by improving the number of people who are willing to play by creating an opt-in friendlier environment.
The problem there is that you're putting it forward as an opt-in. People aren't going to suddenly flock to the game because of an out-of-the-way menu option they wouldn't really know about to begin with, especially since League already has the unfortunate notoriety of having a toxic playerbase.
