Heterophobia?

Three members of the team D2 of the San Francisco Gay Softball league are suing the North American Gay Amateur Athletic Alliance after having their second place status in the Gay Softball World Series revoked because their team was "not gay enough". Teams were allowed to have only two heterosexuals on the team and three of the members were determined to be "non-gay". Even though some of them claimed to be bisexual they were told that "This is the Gay World Series, not the Bisexual World Series". The suit brings to issue whether the gay sports alliance was in violation of Washington state's public accommodations laws by limiting the number of heterosexuals that can play on a team. Although D2 has disbanded, the plaintiffs want at least $75,000 in damages as well as their 2nd place status reinstated and a team trophy.

I thought this was an interesting reversal of events. What do you guys think about this situtation? Should the league be able to discriminate who plays in the league? Or is this a violation of freedom of association? And would allowing heterosexuals to play be against the spirit of the league?