the document states that the " solution must be water based combined with edible ingredients." Is this line referring to the fluid that the object is submerged in, if for example a tank is used?

Yes, the “fluid” in the tank in which the object is submerged during the race should be a water-based solution containing edible ingredients only.  For instance, the fluid couldn’t have any anti-freeze (ethylene glycol) in it.

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