You call them police proceedings, but it’s the public prosecutor’s office (Staatsanwaltschaft) that is calling the shots. Regardless, the article also states that two of the highest courts called the Verwaltungsgerichte have decided that the phrase isn’t illegal per se.
Of course it is illegal in the context of glorifying Hamas terrorism, as it should be. That also puts a responsibility on organisers of protests to make sure that they distance themselves from people who are ambiguous in their distancing from hamas, that’s a positive thing in my opinion.