To quote the law: https://www.jewishvirtuallibrary.org/israel-s-law-of-return#...

> 4B. For the purposes of this Law, "Jew" means a person who was born of a Jewish mother or has become converted to Judaism and who is not a member of another religion."

The "or" there is very important. If my grandmother were a religious Jew, and she had a secular daughter, that daughter would still be a jew (a secular jew). If that daughter then births me, that is now a generation further, where my mother was not religious, I am not religious, but both my mother and I are considered to be Jews for that law.

Due to how that is worded, one can be a secular Jew, Jewish by the bloodline of the mother (aka "race"), and one can be a religious Jew. The law applies to both, so I think it's fair to say that it's a racist law.