The first problem is one of insider knowledge. In other financial markets, you can't trade on insider knowledge. With prediction markets offering greater anonymity, that is much harder to enforce. While the capture of Maduro came to a surprise for most of the world, obviously a number of people were involved in preparing it. So when an anonymous person created a new prediction market trading account just days before the capture, only to bet $30k on Maduro being captured before January 31st, and promptly made over $400k profit, it seems likely that this person made money on insider information.

But there were other bets on Venezuela on Polymarket, one of the biggest prediction markets. For example one that let you bet on whether the USA would invade Venezuela by January 31st. And that is now causing even bigger trouble. The people who bet on that argue that if US soldiers bomb Caracas, land there with helicopters, capture and extract the head of state, and then say the US will run Venezuela, the USA has obviously invaded Venezuela. But Polymarket says that bet was only about "US military operations intended to establish control", while the US action in Venezuela according to Marco Rubio was only a law enforcement action.

Now it is one thing to quibble over semantics for political purposes. You could see the political bias of various media from what words they used about the capture of Maduro, with left leaning media using "kidnapped", while right leaning media using words like "extradition". Fortunately the bet on that used the neutral term "captured", and nobody disputes that Maduro was captured. The bet on the "invasion" is less fortunately worded. What exactly is an invasion? The US is still threatening Venezuela in classic 19th century gunboat diplomacy, but the US soldiers that captured Maduro left, and the US is not occupying the country. Some people would call that an invasion, others not.

And that is obviously a problem of prediction markets compared to sports betting. Much of the purpose of various sports organizations is to establish and enforce extremely clear rules on who exactly has won a competition. People in a sports bar watching a soccer match will argue about things like whether an action by a player was a foul, or whether an offside occured. But umpires on the field rule that immediately, and the game always ends with a clear result, even if some fans don't consider it fair. You don't get people in sports betting argue about who actually won the game. But if a prediction market allows you to bet on anything, the reality might be a lot less clear, and semantics suddenly matter. Is an invasion only a ground invasion with an occupation?

As prediction markets are relatively new, rules have not really been established yet. There is a strong argument to be made that this sort of gambling is harmful, and should be illegal. But even if it is decided that it is legal, there need to be rules on who is the umpire that establishes whether an event happened by the terms of the bet or didn't.