You can also use the prediction markets to hedge in different channels

I could hedge it at the blackjack table too -- that doesn't make a blackjack hand a financial asset. I'm talking about whether the instrument itself is backed by something of inherent value.

You could buy a stock expecting asset appreciation, but the stock itself is a certificate of ownership in a business. Even a derivative of this, like options trading, is a contract to buy or sell or deliver said certificate of ownership in a business. Ultimately it is backed by something of tangible value.