I find it patently absurd for the SEC to be getting involved here. What appears to have happened is that an internet community figured out a particular market dynamic accurately, and used it to profit massively at the expense of institutional investors.

In the past two decades, we've seen more than once that when the financial system fails, even because of the excesses and poor judgement of institutional investors, the US government has been willing to step in and prevent consequences. Now they are simply losing at the game they are supposed to be the best in the world at, and they want to pick up their toys and go home, and ask mom and dad to change the rules so that only they can win the game.

If investment returns are nominally supposed to compensate risk, institutional investors should be willing to accept the occasional downside.