This seems to be a massive flaw in the gambling markets that they propose. For example, let's say Augur (or any number of competitors) host a market on a football match, where team A are supremely better than team B. The odds on A will be extremely short, and there will be far far more people backing team A than team B.
Now, imagine that team B somehow win the match. How can the system prevent the overwhelming majority of team A backers from submitting a fake result claiming that their team won? They will vastly outnumber the people backing team B, and also outnumber any of the casual observers who might also contribute to the results. So the market will get settled as if team A won, thanks to the 'wisdom of the crowd'. The minority backers will be robbed.
Indeed, not only do you have a problem with corrupt backers of a particular view, you have a problem with systematic slipshodness. A whole raft of reporters would have an incentive to report "what you would expect" for any given outcome since that actually is what happens most of the time. So even if reporters can be separated from outcome bettors somehow, outcome bettors wind-up with an incentive to be on "what people expect will happen".
In a lot of ways, it seems like you could create something like a theory that it impossible to create a system that distinguishes "real world input" from "noise that I get from outside" without that system having a model of said real world.
For Augur, how it works is reporters are randomly handed events to report on. Meaning you can't buy REP and then choose to report on a specific event in order to further your financial interest.
Further even if you did that and by random chance are selected to report on your sporting event, you have to hope that majority of other reporters who were also chosen do the same thing you do (keeping in mind you don't know who they are), so if you still choose to report a lie you further risk losing a portion of the REP that you previously bought.
The only practical way to game the system is to have a majority of all REP holders collude and they would in truth control the outcome of all events. However it would be a waste of their money to do so, because the value of REP is derived from trading fees, and their trading fees would be non-existent because no one would use Augur if the reporting wasn't reliable, so the value of their REP holdings would plummet.
It's just like a 51% attack on Bitcoin, it's physically possible but you're financially incentivized against it.
Now, imagine that team B somehow win the match. How can the system prevent the overwhelming majority of team A backers from submitting a fake result claiming that their team won? They will vastly outnumber the people backing team B, and also outnumber any of the casual observers who might also contribute to the results. So the market will get settled as if team A won, thanks to the 'wisdom of the crowd'. The minority backers will be robbed.