Iowa Electronic Market is run by the University of Iowa. It seems to be accepted that it isn't gambling and it isn't a scam.
While Intrade might have been mismanaged, there is nothing fundamentally dishonest about a prediction market.
"market prediction" and "prediction market" are two very different things.
Care to elaborate for the ignorant among us?
Markets are unpredictable.
Markets are only hard-to-predict in terms of future prices and returns. If all you want to do is to compare the relative value of two assets, the current price is a great place to start out. For example, the market is pretty sure that Exxon Mobil is worth vastly more than Groupon. Likewise, a prediction market does just fine at telling you stuff like "Romney is much more likely than Ron Paul to be the Republican candidate."
Interestingly enough, online prediction markets do not predict the markets, just as online dating sites don't date anyone. They provide a platform for other people to try and predict. Of course, many of these people would be wrong, but that doesn't mean the platform itself is a scam.