The problem is the naked short. Shorting was set up to keep the system up and running when dcouments couldn't get filed on time. They had a grace period. Shorting is legal.
The naked short never intends to produce a legitmate stock (sort of like counterfieting). They need to set up some type of penalty that is automatically generated after the grace period is over. Then, what do you do with the penalty? How about distribute it as a dividend to all share holders.