Expanding somewhat on the problem of not using real money - if people lose all their money they can't bet any more. This combats obstinance. If people are simply too stubborn to update on evidence then they will no longer be able to bet. Their poor judgement is removed from the market. The only way this would come in to play on lesswrong is if the bets started to become seriously large. If the system was karma transfer (which I recommended against) then poorly calibrated predictors would lose their karma reserves. This would benefit the quality of large stake predictions but it would completely alter the meaning implied by karma.
Errr... now that I read that back to myself it tempts me towards perverse speculation that that the change in implicit meaning of karma could be a good thing. At least to the extent that karma can be used as a metric for quality of expected predictions (only a minor purpose).
I will bet 500 karma that a funny picture thread will appear on Less Wrong within one year. If anyone is interested in the bet, we can better define terms.
Right now the LW software doesn't support karma transfers. Until it does and we can develop a more robust prediction market, let's just record the karma transfers on the wiki page that already exists for this purpose.
I will also give 100 karma to anyone that donates $10 to the SIAI before the current fundraising campaign is over.
10,000 karma for the first person with a karma transfer source code patch?