I think the issue is the ease of getting users banned, and the lack of actual moderating at all that is the problem. It literally is as easy as fill out the form, user is automatically banned, no verification required. Microsoft is not actually enforcing anything.

My son is 10 and has been playing Minecraft for most of his life. I would consider him quite good at it. I sometimes watch. Every couple of months one of his friends will get banned for no reason. Usually the reason is profanity in the chat, even though they play with the chat off and are FaceTiming on the side with each other. It turns out that the system is so easy to manipulate that other users (kids) will report them just because they don’t like how the game went.

Basically spoiled kids will say if you don’t do what I want then I’m reporting all of you and getting you banned. And they do. Microsoft doesn’t actually verify the claims, just blanket bans all of them.

So the kids create a new account, and keep playing. It just seems like something that is perfectly natural to them. It does mean that I would never spend a dollar on anything Minecraft related though.