Chesterton's Fence applies. (1) Shorting is necessary for the operation of the derivatives market due to the need to hedge Greeks. (2) Shorting is necessary f

Chesterton's Fence applies. (1) Shorting is necessary for the operation of the derivatives market due to the need to hedge Greeks. (2) Shorting is necessary for market makers to provide quotes on both sides, which is why spreads are so tight. (3) Shorting is a natural part of any market for a fungible product. We can't short houses (this was Elon's flawed example) because they're not fungible. We can short commodities that are fungible (which includes stock) because it's possible to create a contract where repurchase and return of said commodity by the borrower makes the lender whole. Banning shorting is an authoritarian move which says "an owner of a commodity (gold, silver, stock) is disallowed from arranging a voluntary contract to lend it to someone for a fee". (4) Shorting is to the benefit of longs that lend stock due to borrow fees, which benefits the lender in excess of the adverse market impact. (5) Shorting is opt-out. The float owner can prevent their float from being shorted. (6) Shorting is fundamentally healthy for the capital markets. NKLA was only revealed as a fraud because of an incentive created to find downside possibilities in stocks. If you remove that downside incentive, you get more bubbles because everyone is incented towards hype and promotion.