The basic principle is that when something is made illegal, the law has to be enforced. This is done by taxpayers and/or participants in the economy spending money to hire police officers and various other agents. Therefore, laws should be deployed sparingly and only when positively justified, to keep the burden of enforcement as low as practical.

There is no reason to make this illegal and put effort towards banning it. Eg, I'm not losing any money and it is entertaining. If I think the price after the shorts get involved is too low I can buy the asset in question. Why should I, in my capacity as a taxpayer, be getting involved and spending money through my government?