There is a more secure design than what aan have described, basically a third party controls whether Alice or Bob will be paid. (It cannot send money to Eve, though.) But if third party dies, Alice and Bob can settle it among themselves.
This would be the n/k keys thing?
Well, the basic version is just 2-of-3 multisig, however there is a more complex script which would decrease reliance on third party.
Maybe that'd be better, even if to some degree it still requires A/B trust the third party.
It is fundamentally impossible to settle bets securely without trust into a third party.
Almost... I have a sketch of a fully decentralized prediction market design, but it is really complex and still kinda imperfect.