There would have been no problem if the parade organizers had limited participants to family friendly exhibits as essentially all parade organizers do. But obviously they intended at least some content that would be R and X rated in movie theaters, i.e. totally inappropriate for children. And when officials made that off limit to the kids, the parade organizers didn't cancel the X rated exhibits. They cancelled the event.
That definitely should raise eyebrows of all decent people everywhere as to the motives involved by the parade organizers.