Fading a GUI button on cursor scroll?

By "fading" I assume you mean a "gradient" transition

The WheelForward and WheelBackward events do not fire for GUI, they only fire for the mouse object. However, we can use the mouse and WheelForward/WheelBackward events in conjunction with a GUI to determine whether or not the mouse is hovering over the GUI.

Once we figure out how to get the scroll events to work in conjunction with our GUI we need to figure out how to implement grading. I've already added a generic function that handles grading.

The following code must be in a LocalScript in order for it to function in online mode.

local mouse = game.Players.LocalPlayer:GetMouse()
local myGui = script.Parent

local debounce = false
local mouseOver = false

local colorFrom = Color3.new(0, 255, 0) -- Green (change to myGui.BackgroundColor3 for current color)
local colorTo = Color3.new(255, 0, 0) -- Red

function gradience(n, color1, color2) --a simple function that returns a color after gradience from color1 to color2  at a specific point *n* of grading. or something like that.. terminology is probably a bit off.
    local color = {0, 0, 0}
    color1 = {color1.r, color1.g, color1.b}
    color2 = {color2.r, color2.g, color2.b}
    for i = 1, 3 do
        color[i] = (color1[i] + n * (color2[i] - color1[i]))/255
    end
    return Color3.new(color[1], color[2], color[3])
end

function startTransition(i, t, start, finish) --function that changes the BackgroundColor3 of the GUI. **i** represents the amount of iterations from start to finish (value between 0 and 1) and **t** is the delay between each iteration. the smaller t is, the less choppy the transition is.
    if mouseOver and not debounce then
        debounce = true
        for n = start or 0, finish or 1, i or 0.1 do
            myGui.BackgroundColor3 = gradience(n, colorFrom, colorTo)
            wait(t or 0)
        end
        debounce = false
    end
end

myGui.MouseEnter:connect(function()
    mouseOver = true
    myGui.MouseLeave:wait()
    mouseOver = false
end)

mouse.WheelForward:connect(function()
    startTransition(0.01) --if **t** isn't given, the wait time between each transition is automatically as fast as it gets (0 or 0.03)
end)

mouse.WheelBackward:connect(function()
    startTransition(0.01)
end)

Edit: the WheelForward and WheelBackward events don't fire when the mouse is hovering over a TextButton (or ImageButton) so myGUI needs to be a TextLabel, ImageLabel or Frame.