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It's the shah's flag, not the country's flag. A "fuck Trump" flag would have been banned too. This journalist is a liar www.nytimes.com/athletic/736...
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NYT was just the first search result and it's straightforward reporting: FIFA got a court to uphold its ban on this specific flag. As to what that flag means, this post and its follow-up are less simplistic than what I said:
On just a bit of half-assed googling, I get the idea that the "lion and sun" flag is...really complicated? IIUC it was in use in both the Democratic Interlude and the Late Pahlavi era, and today is more broadly seen as an anti-IRI symbol and not specifically monarchist? Except...