I think the "market creator decides" works really well for play money markets. https://manifold.markets doe this. The risk of a "rug pull" is often discussed when assigning probabilities, and you can see people's history to decide if you trust them.
A good market will have a well thought out process of deciding the truth. For stuff where there is a betting market or money market, it is easy to refer to that. Otherwise for something like "Will Russia invade Ukraine", at the time the definition of "have they invaded yet" had to be figured out, especially as no one knew how far it would go.
(And sorry I might have been confusing. I am not the OP or creator of the Show HN, but I jumped in and answered how I would do it)
First decide if you want the bets to be taken by an algorithmic market maker (so anyone who wants to place a bet can place it, but they get slippage, like Uniswap) or an order book (more like you say "Ill bet $500 at 33%" an then someone else says "I'll take the other side", like Betfair)
Let's assume you use a AMM. Then the way to do it is let the market maker pick the probability, and provide the initial liquidity to the AMM at those odds. So they are incentivized to get it right. To derisk them a bit (after all they are taking bets with the least information, right at market open) you give them commission or something like that on bets placed.
These are complex decisions. Manifold.markets went though various iterations. They are erring on the side of simplicity for new users, so they fix the odds. You don't get a choice, it is 50%. Because it is an AMM you quickly revert to the right probability. Of course, since you time the creation of the market you could make those correcting bets yourself just in time.
Setting all initial odds to 50 % seems like a great way to get people to propose bets that are very likely or very unlikely, and then immediately correcting, as you say. What does manifold.markets do to prevent that?
I like the idea of the market creator providing the initial liquidity in exchange for commissions, though I am concerned that would leave the AMM short on capital to satisfy everyone's transactions. Maybe. I'd have to run some of the calculations. I hadn't thought about this approach. Thanks!
(I'm well aware you aren't the OP or anything, I just thought your comment was insightful so I took the opportunity. No regrets!)
A good market will have a well thought out process of deciding the truth. For stuff where there is a betting market or money market, it is easy to refer to that. Otherwise for something like "Will Russia invade Ukraine", at the time the definition of "have they invaded yet" had to be figured out, especially as no one knew how far it would go.