Comment by fasterik

Information aggregation is the theoretical upside of prediction markets. Granted, their effectiveness in that role is an empirical question. For gambling in general, the upside is that people obviously enjoy it, not to mention the right/freedom to make choices about how one spends time and money as a responsible adult.

If harm to the consumer and societal burden are the downsides you're concerned about, you could justify banning smoking, alcohol, and junk food for the same reasons. We don't generally do that because we recognize that where there's demand there will be a market, whether it's legal or illegal. So you also need to weigh the potential harms of a black market against those of a legal and regulated market.