Don't just get your news from Bloomberg or CNN.
GME has increased its percentage of the S&P because retail investors have bought the position. Blackrock is not taking a position that a short squeeze is possible they are just reacting to the index.
Further they are in sptmi which massive etfs like vanguards vti & blackrocks itot are benchmarked against st.
Any institute, including GameStop themselves, would be committing a crime if they knowingly triggered a short squeeze. The SEC rules on this is quite clear.
What's interesting to me is that the official SEC report on GameStop "squeeze" specifically called out that the rise in price WAS NOT due to short covering, but rather a large increase in retail buying and market makers balancing options. So the reported % short went from more than 100% to less than %20 with zero short covering and prices falling? Yeah, sure.
Is there any law or ruling you can point out to?
I don't think (but someone correct me as I'm no professional) the occurrence of short squeezes are illegal, unless there is a knowing collusion behind it (check previous cases from courts regarding collusion to trigger short squeezes). What is illegal is naked shorting (https://www.investopedia.com/terms/r/regsho.asp) which could be a trigger/condition to future squeezes..
Issuers have precedent for issuing shares into shorts [1][2].
[1] https://www.nytimes.com/2008/10/30/business/worldbusiness/30...
[2] https://www.bloomberg.com/opinion/articles/2021-06-03/amc-ha...
Buying significant calls will move the market as the market maker buys shares the ensure they can cover. Shorting drops price because it "creates" shares. Even six figure trades can move the market,
There was never going to be a flag day though... shorts cover over time as their bet looks less likely to payoff. By the time the "squeeze" day arrived the billion dollar losers had already covered.