I'm either confused by your statement or the article. The article seems to imply that they created a fake history for the listings as well as fake buyers/sellers, and yet were taking real money (albeit Bitcoin) from their users, with the intention of paying out to users out of pocket.

Even if the laws are unjust or prediction markets are good, surely neither of those points matter if the data backing it up is generated rather than real.

I'm not claiming to know anything about economics here I just don't feel like this statement meshes with what actually happened -- the law took care of what reads like fraudulent practices, and we certainly shouldn't be cheering on Sand Hill because they tried to set up a game around it.