Real money would definitely be preferable but I'm pretty sure that idea is a non-starter. You run into gambling regulations with prediction markets and it appears that it is currently pretty much impossible to run any kind of gambling operation in a way that is reasonably accessible to anyone in the US. US credit card companies generally aren't allowed to process payments for online gambling sites. Even outside the US there is a minefield of regulation to navigate.
InTrade suffers from this - even though I live in Canada rather than the US I haven't been able to fund my account with a credit card.
We could just do it just like the informal bets here: trust each other to PayPal the money to the winner, or bet charitable donations.
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?