But they still missed an existing opportunity to abuse the system: there were rewards for winning, but no punishment for losing. So two people could agree to transfer a lot of bits from one to another, and split the price afterwards.

I raised this possibility, but an instructor said they'd use human judgment to stop us from doing that.

(My actual idea was along the lines of "if two of us decide that we aren't going to come to agreement on a market, we can just repeatedly alternate our bets, and each expect that we're getting arbitrarily many points from this". The instructor said something like, they'd just ignore all but the final bets if they thought we were doing that.)