I generally agree with
Hulavuta theory. Either:
1. The Elite Four was so powerful there was no previous Champion that when someone, in this case Blue, finally defeated them they were offered the Champion position.
2. There was a previous Champion who wanted to retire/go journeying but didn't want to leave the Champion spot empty so waited until the first person to beat him to hand the position over to, of course it being Blue.
3. A combination of the above two, there was a previous Champion but he died/retired leaving the Champion spot vacant and so the first trainer to then beat the Elite Four, Blue, was offered the Champion position.
Eitherway, being an egotist Blue accepted though maybe after a year (or even a few months, I don't think he was Champion for long) he wanted to start journeying again and with the only other qualified person, Red, also journeying then Lance probably instead challenged Blue for the title of Champion and won, letting Blue free to travel (until he was called back to temporarily run the Viridian Gym).
But once again this is all speculation, and remember this was the first game so not only was the plot simple but there was maybe some
early installment weirdness.
Another mystery, but more on a meta sense:
Now that Deoxys is available in-game, does it no longer count as a Mythical Pokemon? For those who may not know, in recent times the Pokemon Company had given the Legendary Pokemon which could only be gotten through events the title of "Mythical" Pokemon. The list of Mythical Pokemon of Gen VI is Mew, Celebi, Jirachi, Deoxys, Darkrai, Manaphy, Shaymin, Arceus, Victini, Meloetta, Genesect, Diancie, Hoopa, and Volcanion. A Mythical Pokemon usually can only be acquired through special ways but never catchable in the game. However, ORAS has made Deoxys catchable, so the question is does Deoxys no longer count as a Mythical Pokemon? The main ORAS website says Deoxys is a "Legendary" Pokemon instead of "Mystical" as they called Diancie and Hoopa.
In my opinion I don't think we should remove its title as Mythical Pokemon because it was only made available in-game for one (set) of games. In addition in order to even "encounter" Deoxys we had to destroy a meteor in space so it's still technically not findable in Hoenn. All the normal Legendaries have been made catchable in more then one (set) of games, so I say we wait for it to be made catchable a second time before yanking its title of "Mythical" away.