The smartphones end up just being smart controllers.
As there is just one machine running the *real* game this means they are relatively easy to create. No crazy networking, state syncing, or dead reckoning required.
For controllers the sky is the limit.
Have a one button game. The user touches their screen.
Make virtual DPads
Make virutal paddle controllers (think Pong)
Have users choose answers to question like Jeopardy
Access the camera, send selfies to the game.
Emit sound effects from the phone.
Use the device orientation API and rotate something in game to match
Make a rhythm band where each device becomes an instrument.
Make a rhythm game like Parappa but each person is a different color so that they each have to play their part at the right time
Let the user draw something on their phone. Insert that drawing into the game.
Show diagrams. Let the user plan out football plays.
Controllers can change dynamically.
Have 2 dpads for the dual stick part of your game. Have a single button for the speed contest. Change to a 3 letter box to let a player enter their high score initials.