Doesn't the insurance market have the same moral hazard? If you are paying for fire insurance it promises you a bundle of cash if your business burns down. At that point if the finances of your company go into the red, your only chance of becoming whole financially might involve a fire, and then you start calling folks like Tony Soprano to find an arsonist

To an extent, but insurance also serves a vital economic function of allowing people to spread out risk.

The counter-parties in insurance are also sophisticated businesses who are highly motivated and capable of tracking down a significant portion of fraud.

The counter-party in prediction markets is other gamblers who usually have no ability to investigate fraud whatsoever. The prediction markets have some motivation to prevent fraud to protect their reputations but they don't directly lose any money from fraud, so they aren't going to do it nearly as effectively as an insurance company.

it does. because insurance is a bet. but it also has legislation and organized investigators behind it to drive up the risk of committing fraud (and, therefore, the necessary reward to justify it) whereas these bets-masquerading-as-financial-instruments don't. take the example from the OP: we have laws about falsifying votes and other obvious things like that, but you can bet on what time the last votes are accepted, what time the last votes are counted, which org will publish results first, will an org publish incorrect results, a lot of things that can potentially be manipulated without violating a law but would still weaken trust in our elections at a time when there is a decade long concerted effort to convince people that elections are being gamed and don't work.