But yes, I think any realistic implementation would have to be tightly controlled. With the traders being whitelisted and audited after large bets (to test for conflict of interests), make their bets public, and force them to give reasons for their predictions, etc.

Personally I like the idea of not using a market at all. Have individuals bet with play money, or just assign odds directly and skip betting. Then you can find a set of individuals that are very good at making predictions, and average their predictions together. This is basically what they did in the book "superforecasters" and the CIA now uses something like this. They found it was superior to prediction markets (which themselves were much superior to predictions made by 'experts' with access to classified information.)

Tough players in prediction market will eventually start techniques like this, if they work. But it shows that just the incentive of betting alone isn't enough to get the most accurate predictions from people. You really need to filter for the people who are surprisingly good at it.