Of course he should be punished but the best lesson here is for bettors. Those who wager on "prediction markets": you are betting against people who have access to more information or can influence the outcome of the wager. Don't waste your money.
Yup, same with any kind of betting - sport, even draw games. There are obviously stories that someone managed to "game the system", like a man who figured out how to find winning scratch cards (Mohan Srivastava case) or Željko Ranogajec winning in Keno, but the point is that in the first case it was luck + skills, in the second it was overcoming the TOS by creating a lot of fake accounts, that's why the guy had to gi…
Betting on a final score in most markets is fine.
When betting gets extremely narrow and specific e.g. "Player X will be subbed on for Player Y" it gets morally dubious.
There is a lot of overlap with insurance markets. The incentives have to be aligned (life insurance) with sensible guard rails against abuse (cooling off periods to be covered for suicide)