From: https://www.fool.ca/investing/how-does-shorting-a-stock-work/
Is short selling illegal?
No. But in Canada, short selling may see some regulation in the future. That’s because some investors are engaging in certain questionable practices, most notably “short-and-distort” campaigns. In these campaigns, short-sellers will sell borrowed shares of stock, then use social media or other means to publicly attack companies, thereby bringing the stock prices down. When the prices are low enough, they repurchase the shares and profit from the price difference.
Conversely, some short-sellers will use a “pump-and-dump” strategy, which spreads positive (but false) rumours about a company, raising stock prices momentarily. This gives short-sellers enough time to sell borrowed stock before the prices go back down.
The Canada Securities Administration (CSA) is well aware of these problems, and they’re working on making new short-selling regulations.