Do you have citations for this? The academic papers I've read on prediction markets are (broadly) positive.
"How long would it be before you saw traders investing in a way that would bring about the desired result?"
As in, if one found a way to bet against your car remaining in tact and realized sabotaging your car was cost effective to manipulate their bet, then they reap the market pay out. Is this good?
https://en.wikipedia.org/wiki/Information_Awareness_Office#F...
Incentives in smaller markets (e.g. local elections, or personal car crashes as you say) are super interesting though.
You just described insurance fraud. And just like in insurance, the fix is to be very careful about how you describe the "win" condition—not just "will the car become damaged" but "will the car become damaged through no fault of the owner" (to begin with; the actual terms would be much more complex).
I'm admittedly naive in this subject, but the name calling doesn't help.
On the second point - there is solid evidence that, yes there are ways to pick stock besides JUST analyzing the company - see Momentum investing https://www.aqr.com/Insights/Research/Journal-Article/Fact-F...
I've seen plenty of critics of the efficient market hypothesis, and Fama himself has said that the market is not efficient.