Druid wild shape and water elementals

What do you do if the Druid jump into the water elemental and wild shapes into a shark?

On the face of it, I don't think you need to particularly do anything. Though I'm open to correction on this, RAW, I don't believe you can occupy a hostile creature's space (even if you're smaller than it), only pass through it. Even if you can the Water Elemental is going to use Whelm so the druid is either going to be thrown out of its space and be gasping for air or it's going to fail the save, take damage & be restrained within the space & keep taking more damage at the start of the elemental's turn, so I'm not entirely sure what your player can really hope to achieve here.

If you can provide more context if this is more than a simple combat scenario and/or if the player is trying to achieve some purpose that you're not sure how to rule on, I can perhaps give you better advice, but these are my initial thoughts.

I don't think you can actually "jump into" a Water Elemental in this manner, but a Water Elemental can sort of swallow an enemy using its "Whelm" ability, which amounts to the same thing.

In that situation, the Druid would be Grappled and Restrained, but neither of those conditions inhibits their ability to use Wild Shape, so they could certainly turn into a shark to prevent themselves from suffocating. It would still be subject to the ongoing Bludgeoning damage effect, though.

If by "what do you do", you mean, what should the DM have the Water Elemental do to combat this, I'm not sure its tactics would need to be any different than if it had swallowed anyone else.

Quote from fiaraven >>

Though I'm open to correction on this, RAW, I don't believe you can occupy a hostile creature's space (even if you're smaller than it), only pass through it.  

Yeah, in general, you can't do that.

There are a few creatures out there (including the Water Elemental itself) that have a special ability allowing them to do so, and it's definitely possible there's some effect or ability out there that would allow a player character to do it, but it'd be pretty rare. (You can do it with Gaseous Form, but that also makes you unable to pass through liquids at all, so it wouldn't help in this specific case.)