It was illegal, but for the most part tolerated. Yes, it was just one-way geostationary communication rather than internet access, but it wasn't like people were doing anything special to hide the dishes on their roofs.
I think most authoritarian regimes tend to tolerate some low level violations of these kinds (VPNs were also illegal yet openly sold) in exchange for the public allowing them to stay in power.
With Starlink it probably helps that even the previous administration, despite their conflicts with Musk, turned a blind eye to Starlink being supplied to Iranians even given the Iranian government's protests (IIRC).