And there is an obvious reason for this. Murder is very illegal. You therefore don't need short selling to be illegal because if someone sells short without killing anyone then that's fine, and if they do assassinate someone then you don't need to be able to charge them with short selling because you can charge them with murder.

Notice also that the murder (or tampering with sensors etc.) is the thing you don't want happening in your jurisdiction, so that's the thing you have to prohibit anyway, because even if you ban short selling or prediction markets in your jurisdiction, having them in any other jurisdiction in the world would allow anyone to just place their bet there and you're right back to needing to deter that by punishing the murder rather than the bet.