Fraud requires intent to deceive. Where's the intent to deceive in short selling?
If I sell you an August-settled coffee future, that's a promise to deliver you coffee in August. Is it fraudulent if I don't have the coffee right now? After all, I've sold you something I don't own.
Of course it isn't. What matters is that the contract is fulfilled, and for equity sales in the US, the contract states that a share will be delivered to the buyer 2 days after the transaction.
From the other end, someone is accepting payment in advance i.e. selling a product that doesn't exist.
If you intend to purchase that product (or constituents of it) from third parties, then that becomes selling a product that you don't own (the third parties you intend to buy it from currently own it).
Now you can say it doesn't yet exist, or isn't yet bought, in order to fulfill the order - but the argument for selling stocks you don't own, is that you don't yet own them. I see no reason to say a genuine intent exist when fulfilling a purchase order, but not when returning a stock; kick-starter provides enough evidence against that..
How about if you sell a share that you bought within the last two days. I mean, your buy trade hasn't settled yet so you technically don't own it yet. Is that fraud?
It's not fraudulent if you don't have the coffee, as long as you make public that you don't, "I do not own any coffee, but will sell you a delivery of coffee for August".
Now, if you're selling share in ownership of a company, IMO it's right to disallow - by law - representations of ownership of companies that are not backed by numbered shares. It's not coffee, you can only own shares in the company itself, you can't get those shares from other origins it's not a commodity.
You make a post-harvest offer to sell me coffee from a particular plantation, then you arrange for the media to report that plantation's coffee is really inferior, maybe not even drinkable - something you had arranged in advance, of course. Tell me, why is this good for society? Now, you advertise, with your friends, lots of coffee available at low prices (after all the media said it's inferior coffee), only thing is you're offering more coffee for sale at low prices than there is coffee from that plantation ... that's driving the price down, there being lots of coffee noone wants ... only it's a lie, a trick, a fraud, just so you can manipulate the price. And now, oh look that plantation has gone out of business and you managed to buy them coffee I ordered for essentially nothing. Wow, you added so much value to the World by destroying the livelihood of that coffee plantation's workers.
Furthermore, that agreement doesn't in any way apply/affect to the stock you sold (or the person you sold it to), the obligations to return is yours alone.