Oh, it's totally freedom of speech. But freedom of speech doesn't mean freedom to broadcast your speech on public property without exception.
If they hung the banner on their house or private property, there would be nothing to be done to stop them.
But you can't hang a banner from the governments property without their permission, which must be given in a manner impartial to the content on the banner beyond any compelling interests like "no hanging very distracting banners where it could cause accidents".
They didn't ask, so they can have their banner removed just as though they hung it from the flagpole in front of the courthouse.
They're being prosecuted because a racial component to a crime is an aggravating factor that makes it more appealing to prosecutors.
So their claim is entirely correct: they're being prosecuted because their crime was minor but made worse by being racist. We've already decided that it's reasonable for the government to be particularly harsh on racist crimes because it singles out a type of behavior that's particularly harmful to society.
So, national emergencies can do some of that, but this one has more to do with financing of programs, and the legal basis for financial sanctions relating to fighting terrorism. It also allows for more flexible hiring of military officers and for there to be more generals than usual.
The actual things being changed by the emergency declaration is listed in the order.
https://en.wikisource.org/wiki/Executive_Order_13224
It's basically "we don't need to ask Congress when the Treasury department tells a bank they can't send money to specific overseas accounts".