You’re right, it is not acceptable behavior.
However, it is still legal speech.
I don’t think anyone has argued it is illegal. No one was arrested but it is morally indefensible, at least to me.
It’s not acceptable to have racist admissions policies for any organization.
Or is it?
Free speech does not mean freedom from consequences. The University is not legally or ethically obligated to let them do and say things which reflect badly on the school.