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So, as quick reminder to those who don't know: The Morag Tong is a Dunmeri organization that focuses on the assassination of certain individuals, be it in regular writs, House Wars, or what have you. It's a key aspect to Dunmeri culture about Struggle and, more importantly, Survival. Because the whole dogma/ideology of the Tong comes from the fact that Mephala had taught the Chimer the ways of war in shadow and secrecy. This eventually led to the organization practically worshiping Mephala and a being known as 'Sithis'.

Fast forward a long-time in DragonBorn, you have the aftermath of the Argonian Invasion of Morrowind that completely devastates all Houses involved. Hlaalu is kicked out of the Council and demoted from a 'Great House' to a minor one. Redoran takes socio-political control of Morrowind as a whole, practically as defacto rulers (there is no mention of a 'King' of Morrowind, simply that Redoran and several other Great Houses rule through a Council that Redoran leads), Telvanni is in ashes, Indoril is literally the Temple, etc., etc.

But, as far as I remember, most Redoran-members (and the Councilor) basically state that the Morag Tong is not only defunct but it's also illegal. Like it's been banned as an organization. Excluding the fact that a former Morag Tong member explicilty states that the Morag Tong was just disbanded, nothing else (which is then proven to be inaccurate throughout the dlc). But let's just chalked that up to an individual whose not been in his homeland for many years probably and is not "in-the-know" as far as all the other Dunmeri are on the functionality of the Tong.

...Why exactly would the Redoran, a house that's been repeatedly described as a fairly-traditional House that is bound by honor and literally that is one of its most-recognizable features, ban an organization that is also based on honor and tradition? Literally the Tong is the epitome of Chimer/Dunmer tradition. Especially since, now, the Worship of the Reclamations is preferred over ALMSIVI. Why would a Mephala-worshipping, but honor-bound, assassin cult be banned by a traditional-populist regime?

The reasoning implied is because Redoran didn't want to be assassinated by vengeful Hlaalu. ..But would that really stop it from happening? The entire point of the Tong in House-politics is two-fold. To prevent House Wars and conflicts, and to end House wars and conflicts. They're the equalizer in these affairs - taking out certain members of certain Houses for pay. They're practical mantra is "kill them with secret murder." So, say Hlaalu does manage to pay the Tong for an Honorable Writ of Execution, and the Tong accepts this offer.

Why would the Redoran's reaction be to ban them? They, a house built upon honor and old-traditions so long as they do not conflict with the current interests of the House or its honor. And while that may be the reason (nobody wants to get murdered), then why not have an argument before? For all the years that Redoran has existed - only now when they have full power do they have a reason to not like the Tong?

What about when the Indoril ruled Morrowind for all those centuries? Was the Tong illegal then, or tolerated?

Hmmm, as you said the Morag Tong was an equalizer but with the current state of affairs such a thing became obsolete. Redoran is likely the only Great House which has real power to back-up their claims. The southern reaches of Morrowind were invaded by Argonians, Vvardenfell was reduced to ashes in the events of the Red Year, the Temple is literally death.

The "last" Great House most likely feared that the Morag Tong could become a tool for those who had fallen and would be used to undermine the last pillar of strength that the Dunmer had left. As there is no need for the prevention of House Wars if one House has more power then the remnants of the other ones combined, Redoran is absolute now.

Those who exercise great power wouldn't want to give somebody else any kind of power to counteract theirs, even for the sake of balance (the other person might screw it up, after all!).

Trust is one of the first things that fades when power grows.

i agree with Trelares, the existence of the Tong would probably be more unbalancing to the Dunmer society so they are banned. No more houses, no more house politics (unless Redoran and Indoril want to fight), no need for the quiet diplomatic services of the Tong by which house A can kill in house B without instigating all out military war

banning the Morag Tong can be seen as quite a wise and balanced thing to do considering they could have been absorbed or monopolised by the Redoran and sent to destroy what opposition still remained

You have a point that it's a bit counter-intuitive, but in my view, the banning of the Morag Tong likely didn't get much opposition in light of their changed circumstances after the Red Year. The Dunmer population was decimated, many of those left alive were crippled and/or destitute, and enemies were and are at the gates. For the first time in millennia (technically, the first time in their existence), the Dunmer have been forced to face an existential threat. They could've gone the way of the Snow Elves after the Red Year, and still could. Cooler heads probably recognized that, with Mommy, Daddy, and Uncle Silly not around anymore, they couldn't afford to keep killing each other as a formal part of their political system. It's time to play nice or face extinction as a culture.

Slighting one of their three chief Goddesses is a big risk. As much as it makes sense to put the Tong on the backburner until Dunmer society is up and running again, one has to hope that some sort of deal was reached with Mephala before they did so.

The Daedric Prince would probably not take kindly to being forgotten, and I imagine that Azura and Boethia would also take exception to the removal of the Tong. I mean, they got [&@%!] when elves spread lies of their brother Lorkhan. The defamation of their fellow protector of Morrowind could come with consequences.

The Morag Tong is illegal during the events of ESO as well, even though technically ALMSIVI permit them to operate and they help the Ebonheart Pact twice. If they bounced back from that, maybe they'll bounce back from Redoran? We see them in full force in Dragonborn and it's still quite an impressive organization despite being 'disbanded'.

^They can afford waiting out for more favorable times in which they can come out once more, given that for assassins it's not unusual to operate from shadows.

Imyan implies that the organization peacefully broke apart, but it also sounds like he's purposely holding back what truly happened when you ask him why he left the Morag Tong: "I didn't have a choice. When the Red Mountain erupted in Morrowind, the Tong fled... spread to the nine winds. We made a pact that one day, we might reunite... but I believe that day is long in coming."

From my reading of it, it sounds like they were persuaded to end operations, for some reason. But this is directly contradicted by Dragonborn, which shows that the guild is clearly still operating, and is even defending their territory from the Dark Brotherhood still. The only thing I could imagine is that that the Morag Tong agents that were encountered in Solstheim are hanger-ons, that the Grandmaster of the time surrendered their position, told their agents to cease operations, but some refused. Imyan would have been from a branch that stood down, while the ones in Solstheim are a part of the "rogue" Morag Tong. Or it could be the opposite of that, with some branches, like Imyans, standing down in face of being outlawed, while the Grandmaster ordered the organization to go to ground.

It seems like the Tong have a vested interest in returning Hlaalu to power, given their relationship with Vendil Severin.

Their Grandmaster during the events of Morrowind was a Hlaalu. Perhaps despite their vaunted neutrality they really do play favorites, and the Redoran ruling council felt threatened by their affinity for House Hlaalu.

That makes sense. I think the Narsis council in ESO were working with the Tong as well, to protect the Hlaalu capital from that plague.

Yes, politics does look most likely

though i like to think an official assassination cadre is a sort of cultural luxury enjoyed by the Dunmer when all houses are firing on full cylinders

It's possible that Redoran has their own elite cadre of assassins that we're simply not privy to at the moment. A lot can happen in 200 years. I loved the design of the Redoran Watchman helmet in TES III. I'd like to see that helmet combined with Chitin or Netch armor on a Tanto-wielding Dunmer assassin, but that's just me. That'd be more Redoran flavored. I like to imagine the Telvanni assassins using the Dust Adept helms and netch leather armor. Because of COURSE the Telvanni have assassins. Nobody is more paranoid than them.