I don't know what it is about Morris Dancing, but it also seems to illegal on this side of the pond (Seattle, Washington). The following article describes the incident.

S. in Seattle

DANCE NOTES - Dancing May Be Arresting
by Karen Shaw (from the Seattle Folklore Society Flyer, August, 2001)

What happens when you combine a beautiful summer solstice night, four groups of Morris dancers, a few musicians, and an Army Corps of Engineers person who may have far too little to do? I was excited as my husband and I drove to the Magnolia side of the Ballard Locks by the fish ladder, where we were to meet my other team members of North by Northwest Morris dancers. At 7:30pm, our group, Misty City, Mossy Backs, and Sound and Fury were all meeting to dance in the summer solstice. Our musicians were ready to play; we were ready to dance. There were merely a handful of people on that side of the locks as my group started its first dance. We are a group of eight, and the largest of the teams. By the end of the dance we had an audience of about 15 folks. They applauded as we finished and I felt like a real street performer - the way Morris dancing is meant to be! It was pretty cool, I admit.

As the next group started to dance, a few more people stopped to watch. The music is simple and lilting, the dances are aerobic, and the costumes are bright and colourful. Again, the dancers were applauded as they finished and some folks asked us questions about who we were and why we danced. It was a perfect evening, friendly, peaceful, and with good energy flowing between the dancers and the watchers.

All of a sudden. across the bridge strode a man in a green uniform. He did not look friendly. He was not smiling or tapping his toe in time to the music. As I watched in amazement, he told that since we had forgotten to get a permit, we had to leave- - or else. I'm not sure what the "or else" was; I think we were to be arrested if we didn't immediately cease and desist. We were told that we were on military property, not city property, and they had regulations. And regulations must be followed at all times. Many folks told him that they were enjoying watching us, but to no avail. We pointed out that we were blocking nothing, and that we were dancing for the joy of it. It had no political ramifications and we weren't peddling a thing. Our entreaties fell on deaf ears. We had to go. We asked if he could call his supervisor and get permission; he refused to try.

So we left. We went up to the street level and continued our dances on the public sidewalk, where no one told us to leave. A few folks followed us there and a few cars stopped on the street to watch. We still had fun and we turned it all into a joke. But I can't imagine what purpose was served by making us leave don't understand how we endangered anything by bringing folks a little music and dance on a warm solstice evening. Perhaps some of you might have an answer.