That is the topic of my latest Bloomberg column. Mostly I am pro-prediction market, but my last two paragraphs contain the cautionary note:
Prediction markets have another potential flaw: They focus attention on clearly demarcated events that are easy to bet on, such as who will win an election or whether Rudy Giuliani will face federal charges. Sometimes these are important matters. Other times they are not.
There are more meaningful trends that are more difficult to measure, such whether Americans are feeling more lonely. These things certainly have an impact on politics, but they are not easy to bet on. Political prediction markets are undeniably useful and very often enlightening, but maybe they should come with a warning: Feel free to check the odds as often as you like, but do not let your obsession blind you to the larger issues at stake.
There is much more in the earlier parts of the piece.