[mschuster91]

Simple: short sellers can, if they manage to drive the underlying stock price too low, trigger automated "stop loss" orders, which can (and do) send the stock towards complete collapse. And that in turn can cause a cascade of stop-loss orders e.g. for stocks in indices where the flash-crashing stock has a sizable exposure.

Yes, market regulators can issue halt orders to stop all trade regarding affected stocks, but that still has the potential to cause widespread and immense loss of value.

People going long for no reason but "420.69 $GME" are funny to laugh at, and if they buy the right options they can make a lot of money, but there is no potential of cascade events.

Therefore, it makes sense to keep a close watch and a tight leash on shortsellers.

[nradov]

That is not an actual problem. And in the real world, institutional investors with capital reserves sufficient to really move markets don't generally use such simplistic "stop loss" orders. They have more sophisticated trading and hedging strategies.

There is no need to keep a tight leash on short sellers.