Additionally, not all bets on a person's or persons' life will be made with malevolent intentions. A global non-profit can use prediction markets as an exotic form of donating. The donator takes the "bad" side of the market, and if the non-profit is successful at saving lives, or doing some other form of reportable good, they receive a payout from their bet. Now, if the non-profit pays its employees absurd salaries, operates inefficiently, etc then they stand to lose some amount of money in the prediction market.

If you approach it this way there is no reason all bets on the "bad" side have to have "bad" intentions.