1. The variable length instructions (currently 16 bit or 32 bit but 48 bit on the horizon) complicate instruction fetch and decode and in particular this is a problem for high performance RISC-V implementations.
2. The C extension uses 75% of the 32-bit opcode space, this can be put to better use.
They're saying the benefits from the C extension don't outweigh the costs. They're also saying that if you move forward with the C extension in RVA23 now there's no real backing out of it. As the software ecosystem develops removing it once it's baked in just won't be possible. However adding it back in later is more feasible.
SiFive strongly disagree. They believe the C extension is worth the cost and that it doesn't prevent you from building high-performance cores. They also say that there's lots of implementations with C in already, so backing out of it now disadvantages those implementations.
It could end up in being the first major fragmentation in the eco-system Qualcomm go one way and SiFive the other (other companies also sit on one side or the other of this debate but Qualcomm and SiFive are driving it). Indeed the latest proposal from Krste is to do just that with a new 'RVH23' profile..
I wonder how much this development has been driving SiFive's thinking here? Clearly they are under pressure to deliver to their investors so you can see why they want to keep things as they are rather than consider a big change. Good for SiFive, but good for the long-term RISC-V ecosystem?
Edit: If you want the details check out the publicly readable tech-profiles list: https://lists.riscv.org/g/tech-profiles/messages they've got recordings of the last two meetings that discussed the issue and presentations, all available via that message archive.