Actually there was no prior incident caused by students in context to discipline that caused them to make the decision.
A student stated something like "no real incident" but the school (district?) has a different opinion:
the event was made due to the “growing expectations, liabilities, and risks” connected to the event, all of which have made it “increasingly difficult to continue” hosting them.
I agree with PP that there is definitely more to the story and likely the students (if not the families too) are well aware of the situation.
This quote with "again" makes me think there's been an ongoing situation:
“Prom was taken away from us, right? At some point, it was gone, and we thought that it wasn’t going to happen again, until people stepped up. I feel like we deserve to be compensated for that, and in return, have a prom that we’ll never forget,” Gatti said.
Prom here is limited to grades 11+12; grades 9+10 can only attend as a guest of an older student. There is a budget based on fundraising the Junior class has done in the first 2+ years of school; I'm not sure if there is any additional $$ kicked in by the school but I don't think so (other than it's an official school event and thus covered by their insurance, rules, etc.).