Ok, as usual, a lot of distortion by the echo chamber.
According to even Fox, the issue is that the team's coach thought that the flag might be viewed as "divisive." That's a quote. Divisive. Not racist as OP claimed was the issue.
California high school football players fly thin blue line flag despite ban: Report
I also cannot find any reference to a lawsuit by the ACLU to force students from carrying such a flag. Does OP or anyone else have a link to something referencing the claim from OP that "The ACLU is filing suit to stop the kids from doing this ..." because that appears to be incorrect.
Personally, I disagree with the coach (I see some articles that its a district decision) on this point. I just wanted to point out that the claim that its because some authority has decided its "racist" when all I can find is that its "divisive," and the claim that there is an ACLU lawsuit to stop display of the fact, both seem inaccurate.