I agree, it's not clear cut. It's unlikely that SEC goes after the WSB but they could.
What happened satisfies the four part test for market manipulation. But you would have to figure out the suspects who actually match the test. Most participants are just fools.
I'm not sure it does satisfy the 4 part test, specifically in:
(1) That the accused had the ability to influence market prices; (2) that the accused specifically intended to create or effect a price or price trend that does not reflect legitimate forces of supply and demand; (3) that artificial prices existed; and (4) that the accused caused the artificial prices.
It isn't clear that #2 is satisfied. Telling people that there is an opportunity for a short squeeze to occur is also not that different from normal technical analysis, which stock analyists do all the time. Even setting a price target is not illegal. Porsche did a short squeeze on VW and Elon is quite blatant about squeezing shorts in TSLA, and they've been fine despite profiting handsomely from it. Citron was clearly 'stating their opinion' on GME being worthless, but since they disclosed their position (short on GME), they are fine.
What typically makes it illegal is lying about your own stake, or prices, or data, or plans in an attempt to influence the market. Most smart analysts don't hold positions in what they are talking about, but some do, they disclose them, and they're good.
If someone makes a trade, makes it public, and tells everyone why - and they think it's a great idea - then it doesn't meet the test IMO.
Additionally for #3 - no one that I am aware of is using anything but public pricing data based on free and open market trading data, so it's hard to claim artificial prices existed. If someone has been publishing fake data (so claiming no short interest exists when it does, or more exists than does), then that would certainly check the box off. So far the only claims I've seen of that happening are in public financial analysis claims, not in the WSB data.
Also for #4 - It isn't clear there is any accused that checks off all 4 boxes, or a conspiracy between any individuals that could check off all 4 boxes. WSB isn't a single entity, and my guess is that none of the moderators on WSB are involved in this (if so, they are really dumb). WSB is regularly looked at for insider trading, and always comes out clean because they are a forum where people talk, they actively suppress anything that looks like a pump and dump (at least a normal one), etc.
For sure, and if you require a bunch of the other checkboxes be checked (ability to change price, actual change in price, artificial prices) for a single individual or in an explicit conspiracy between individuals it gets even harder still. The laws around this grew up when this was all mostly done in private or between groups of individuals that were keeping things private (at least at the start), or were paying significant money to explicitly promote something.
Posting about stuff on the internet in public and causing a defacto stampede, especially when it happens after hundreds of other unconnected strangers start posting their own thing? Not sure there is any precedent.
Definitely going to be some interesting court cases coming out of this!
What happened satisfies the four part test for market manipulation. But you would have to figure out the suspects who actually match the test. Most participants are just fools.