I'm thinking a lot of this stuff through for the first time and there are very interesting perverse incentives introduced by prediction markets.

The endogeneity between a market existing and a participant being able to impact the outcome is one of those. It's like the philosophical problem that observing a system changes the system.

There's a lot to unpack with these things, but I don't think the answer is to throttle voluntary transactions between consenting adults. Participants need to be aware of the incentives they're creating in the real world when they place money on an outcome.