It’s not really abuse though. These markets aggregate information; when an insider takes one side of a trade, they are selling their information about the true price (probability of the thing happening) to the market (and the price will move accordingly).

You’re spot on that people should think of who is on the other side of the trades they’re taking, and be extremely paranoid of being adversely selected.

Disallowing people from making terrible trades seems…paternalistic? Idk