It's in the name: Prediction market. The point is to predict an outcome, insiders will naturally be better at that than non-insiders.

Though I think where things start to get a bit more insidious is when the "insiders" have access not merely to inside information, but the ability to change the outcome. That type of insider trading should be banned IMO because it works against the purpose of prediction markets as a tool. (Though the extent to which banning that is possible though is debatable.)