It's legal to be an anti-Semite, but a Jewish instance doesn't want any of that nonsense. It's legal to be a white supremacist, but a server for black people doesn't want to deal with that trash. On the fediverse, instead of having a one-size-fits-all policy like "all legal speech is allowed" or "no anti-trans content is allowed", each group of users can choose for themselves who they want to talk to.
That's the opposite of censorship. I own a Mastodon instance and I've disconnected quite a few despicable servers, because that's what my users ask me to do. Users who thing I'm too strict or too lenient can move to another server more aligned with their own desires. I'm not denying those other groups the right to publish whatever disagreeable content they wish to. I'm just saying we don't want it here on our server.