a16z Crypto has identified the primary challenge in prediction markets as determining outcomes rather than pricing, suggesting AI-driven mechanisms as a solution. The firm highlights that incorrect settlement processes can erode trust and liquidity. By employing AI, particularly Large Language Models (LLMs), prediction markets can enhance transparency and fairness. These models can serve as arbitrators, with their decision-making processes encrypted and recorded on the blockchain to prevent manipulation. This approach aims to ensure public, auditable settlements, reducing reliance on human judgment. Developers are encouraged to test these systems on low-risk contracts to establish best practices and governance.