In addition to the monetary settlement, the city also agreed to repeal the ordinance, which was designed to ban drag performances from taking place on public property.
The bills would renew an effort to regulate drag shows, with supporters touting it as a child-protection measure while opponents say it would stifle First Amendment rights.
Flag displays that depict a “racial, sexual orientation and gender, or political ideology viewpoint” would be banned from any state or local government building.
U.S. District Court Judge Brian Morris granted a preliminary injunction blocking enforcement of the law last month, saying it targets free speech and expression.
Gov. Kim Reynolds, who signed the measure into law, defended it as “protecting children from pornography and sexually explicit content.”
Florida had asked the court to allow the law to be enforced everywhere except at the Hamburger Mary’s restaurant in Orlando, which challenged the law’s constitutionality.
The application asks that the prohibition against enforcing the anti-drag show law only be limited to the Orlando, Florida, restaurant which challenged its constitutionality.
It is the latest development in the ongoing political battle over LGBTQ+ rights in Tennessee, where conservative leaders have sought to limit events where drag performers may appear.