Instead of the service administrator determining who wins or not it should be a number of named and trusted outsiders who would make this decision.

Take 10 reputable sports journalists/well known figures. Pay them part of the 1% profit. In exchange for the money they would agree to provide a proof of the result (signed with their key). Craft the transactions so that for example 4 out of 10 confirmations are needed for the transaction to go through.

The problem here is that "trusted" is not intrinsic to the character of some third-party. I might trust someone with $100, but does that mean I would trust them with $1,000,000?

The better solution is to not to rely on trust or semi-trust (i.e. trust multiple parties not to collude) at all. Instead, incentivize people to act in their own self-interest (the same game-theoretic assumption underlying the blockchain). This is how TruthCoin incentivizes voters to adjudicate decisions (voters are analogous to miners): https://github.com/psztorc/Truthcoin

Pointless to do for short events with small bets. You just kill the golden goose. Why not just a biz and accumulate ongoing revenue? Anyways, deposit risk is low. Sports games last just a few hours.

Some of the bets are not just single games, but the outcome of a whole tournament. And ongoing revenue is only 1%, which relative to the other 99%, won't be so enticing after customer growth has peaked. Eventually, the reward from a "retirement attack" becomes very enticing to an anonymous biz operator (and easily blamed on an admin account compromise).

Its quite dishonest to claim that "money cannot be stolen or seized by anyone" just because the bets/order books are decentralized. The outcome admin/judging is still centralized. Whoever controls the judging, effectively controls the funds.

The judge must not necessarily be one person, OP_CHECKMULTISIG allows setting the requirement to m of n parties which would have to conspire.