You raise a good point: There's nothing intrinsically good about betting and trading venues, and the sane default option might well be to prohibit it. We allow stock and bond trading as it fulfils important functions [1].

What you describe (profiting from creating havoc by some "short" bet) is indeed problematic and is regulated.

This is also one more reason why trading should not be unconditionally anonymous. Another reason: proper trading venues have rules against "squeezing", namely that no entity may hold more than some threshold ratio of the open interest. That's obviously impossible to enforce with anonymous markets.

[1] Tradings allows individuals to time-shift consumption, it funds productive enterprises, it incentivises convergence of market price with fundamental value, which in turn is what enables efficient investment allocation, and it allows the emergence of an economy-wide equilibrium of savings and investments. Note though that all of these functions might well be fulfilled by having, say, one minute of trading a day.

At least the stock market is supposed to have a purpose besides gambling, to raise investment for companies. (Whether it's actually successful at that is a separate matter.) And anyways, your scenario would probably be considered insider trading, and that's already banned.

KYC helps here. Crypto based gambling markets bypass this.