It's really not, though; it's not violent and it's not sexual. Male-presenting children's characters wear female clothes all the time without any controversy; Bugs Bunny is constantly dressing up as a girl bunny, Donald Duck wears a dress in "Donald in Mathmagic Land," and you can literally make Mario wear a wedding dress in Super Mario Odyssey.
(I'm on team Let Your Kids Watch R-Rated Movies If You Want, but even if you think society should get to restrict what parents can show their kids, drag is not something people have generally considered obscene or otherwise had a problem with)