Negative gold!

[Fef]

Players HAVE been outright banned for doing this in the past. Controlling the AH is a bad idea if somebody notices and reports you.

Why is this illegal?

This is not illegal. Period.

I am part of the Azerothian Trade Union, a pan-server discussion forum focussed on WoW economy. We have many members that control or have controlled markets in WoW, none of them ever had trouble. I personnaly dominated the blue-weapon market on my server in vanilla WoW. My very (in)famous main trader would basically buy EVERYTHING and resell at her own price and sell in her name. Like 9 out of 10 blue weapon on the AH would be sold by her. This generated a lot of commotion on the forums and got me reported countless times (the reporting I get for multi-boxing is nothing compared to that time). This also got me filthy rich in game. Nothing like reaching gold cap, of course, but still filthy rich in a time when the most expensive item in game would be a 1000g fast mount.
Well, I never even heard of a GM. Another member of the ATU was controlling the Pacebloom market on her server, not for profit since that was very little return compared to the work it required, but just for fun and the annoyance factor. She never had troubles neither.

Even cross faction trading, sending items or gold from Alliance to Horde or the other way around, is perfectly fine, even on a PVP server.

Basically, any form of market manipulation that does not involve *really* illegal things (like real life money) is absolutely fine and safe.