Both end up custodial. Not cool. Custodied wallets like binance are already censoring tx's. Larger blocks, as you say, lead to only large players.
In the hypothetical, third options don't exist, but in reality they do.
Drivechains; reduce the block size (yes , reduce, you read that right) ossify, push scaling to layer 2 , user choice opt in sidechains.
Maxi's would rather see Bitcoin die then admit the simplest elegant solution all along, that they did not come up with, out of their infinite genious.