The Truthcoin_1.1.pdf available goes over it a bit. I had the same question and had to hunt around a bit to find it.

It's a weighted vote, with loss of coin penalties for not voting or for voting against the majority and coin rewards for voting on low vote "decisions" and for voting for the outcome that ends up being the majority.

The defence here is the assumption that the usefulness of the market long term will motivate people to vote "fairly". I think that's incredibly naive but it might still work. There are strong incentives to vote for who you think the eventual winning side will be and the assumption that that will likely be the truth (for well designed questions) isn't crazy.

There are a lot of obvious ways to attack this type of system but I don't have the expertise to know how viable they are.

Sounds a lot like a "synthetic asset" which is constructed from derivatives rather than the other way around. Actually I think that is what it is, but I'll have to read the PDF to be sure.

Synthetic assets are very much vulnerable to manipulation by whales. Ultimately you are just providing some incentive structure to keep the small players honest, and hoping that the small-bit players add up to significant security in aggregate, more than any possible combination of colluding players.

Generally speaking that's not a very safe assumption to make, particularly when the underlying settlement medium is irrevocable.