In Freakonomics, they point out a wonderful initiative by some journalist to loudly tout their nasty activities and so on, and eventually the KKK & friends turned into little more than bitchfests of bubbas sitting around drinking beer. I.e. he converted them into exactly this type of social club the news story fears.
When they became little more than a social club, they were essentially eviscerated of any real power or large-scale threat.
So. Do the math. These social clubs are singing songs about how wonderful they are as social clubs. While nasty, it's a hell of a lot better than real activist groups, or, worse, terrorist groups. But when you clamp down on them with the force of law, now you're oppressing them (and note, independently of whether it's justified or not.) Now you're giving them something to fight back against.
It reminds me of that episode of one of the law shows, where the goody two-shoes lawyers discover a famous anti-death penalty lawyer is actually helping some on death row accept their situation, and slacking off the filing of endless appeals.
Shocked, they confront him. He points out that filing endless appeals becomes a kind of "boy who cried wolf" thing, leading to more rejections of appeals, and thus marginal cases he actually had a shot in Hell of getting commuted or reversed would be more likely to be rejected. Net effect: His way ended up with fewer executions than simply blanket filing appeals to everything under the sun for every single case.