It being unfair might dissuade people from using it, that would kinda compromise the goal of helping markets reflect reality

But no one is actually hurt by it.

(I'm not saying you're wrong, btw. People aren't always rational.)

Smart people are financially hurt by it.

Isn't that the entire point of the prediction market model? You derive the wisdom of the crowd by enabling smarter people who make better educated guesses as predictions (from the same access to information as others) to win out over time. They are incentivized to do this financially, by winning bets.

If markets just becomes "first person to cheat takes all", then there's no incentive to NOT cheat. So you drive away the people who power the prediction market in the absence of information. Over time, this means that the prediction market is just random noise until a leaker publishes news. At that point, you might as well as just skip the middleman and just make a website "LeakNews" where you can directly offer bounties that goes towards a reward paid out to a leaker for news you are interested in.