Reading around for the prior art on prediction markets, it seems that after the political rejection of the Policy Analysis Market, regulators have squashed every attempt, e.g. Predict It's limits on bet size and number of bettors.

By way of comparison, buying Public Equities in the US is gambling defensible by virtue of funding the companies of the future. Whereas, a Prediction Market is gambling defensible by virtue of what exactly?

It seems there needs to be an argument that's as equivalently strong as "building the companies of the future!". Otherwise, no matter how legally defensible some structure might be, it won't be regulator proof.