The fact some people crave being famous enough to merit a checkmark is not a problem with checkmarks. People chase status of all kinds.
It's no longer for simply verifying authenticity.
His profile claimed he was a Buzzfeed reporter IIRC. Although he was being satirical, he didn’t indicate such, and this causes problems because the whole point of the checkmark is to signal that this person is who they say they are (including any claims in their bio). Since the average random person doesn’t even know who Milo is, they may see his verified profile and attribute his inflammatory comments to Buzzfeed staff members.
Twitter has many examples of taking enforcement actions for silly reasons, but this one actually made sense given that logic.
Twitter knew who Milo was, they'd verified his identity, and although he broke the rules, removing the checkmark told his followers one thing: "we now know anyone Twitter verifies is someone they agree with politically". This puts them on the hook for everybody who's verified.
It should be a verification only. If they didn't like what he said then they should've removed the account.
But i agree, in practice it's a "twitter endorses this account" indicator.
I'm positive Twitter would allow a mainstream-supporting liberal (i.e. someone who vocally supported Clinton or supports Buttigieg or Biden or Bloomberg) to slide on this, like any time someone would jokingly pretend they're part of Fox News. Stephen Colbert, if he had a Twitter account that was equivalent to his satirical character on his Comedy Central show, would be adored and absolutely allowed to get a nice fat bluecheck on his hypothetical Twitter.