Naked shorting certainly leads to unlimited losses, but it’s not the only kind.
Simple example is that i can buy a put option in some company. If the stock price falls below that point, I buy shares and sell them to the option writer and make a profit. My maximum loss is limited to the amount I spent on the option.
Likewise the put seller has not taken unlimited risk - their risk is limited to the cost of the shares they’ve offered to buy at.
