Punishing Racism in-game. Okay, let's start with freedom of speech. The US Constitution provides protection with the first amendment, even racist speech so long as it doesn't rise to the level of threats or harassment. The First Amendment does not make speech sanctionable merely because its content is objectionable (TJ Donovan Attorney General). The division between racial slurs being used to incite violence is the real world "line in the sand" regarding what is punishable. I believe we can agree that since real-life violence is probably not a concern, but the use of racial slurs while in the act of griefing or cheating, is very much punishable.
The UK has a more lax position on protecting hate speech, as do many EU countries such as Germany. But Freedom of Expression is recognized as a human right under article 19 of the Universal Declaration of human rights. Furthermore, in the Supreme Court case Snyder v. Phelps, we see that as much as we all hate the Westborrow Baptist Church hate group, they have a right to assemble and express themselves so long as they do not threaten or criminally harass.
So where am I going with this? I believe we are wrong to punish players solely on the basis of hate speech. But! We can use their hate speech as an "aggravating factor." What does an aggravating factor mean to the mafia community? Well, it would compound the punishment for committing other crimes such as griefing or cheating. So, if they grief by spamming hate speech, that would be punished more severely than simply spamming nonsense. The hate speech alone is not the basis for the punishment, it is an aggravating factor.
Punishing hate speech might feel good in the short term, or provide an easy mechanism to punish problem players, but in the grand scheme of things, I do not believe in the efficacy of limiting freedom of expression.
The link below is absolutely fabulous work studying the use of racial slurs in mafia. I intentionally didn't post this topic there because it's top-notch and I didn't want to distract anyone from the data.