That's one case in 2008.

If volume and stakes are low then sure, they're not too reliable.

If you don't think prediction markets aren't great predictors you should make bets against that market. If you're a better predictor than the market you should make good money. In practice most people can't outguess the market. Some experts can and do make good money.

The reason markets are a good predictor because as soon as an expert sees the market make a bad prediction, they'll make a bet against the market. This in turn will move the price towards the true price. Assuming there are enough experts out there with large enough pockets (which is true for popular bets) then the market will quickly reflect the experts' view of events which is by definition very hard to beat (you have to be more expert than the experts).

And nor should you. But one can compare 538’s model against models made by other statisticians.

But the question that was being asked was whether there was an arbitrage opportunity available which, regardless of whether the market is manipulated or not, has an empirical answer, not merely a theoretical one.