As a former school administer in Minnesota, I know how frustrating these things are. It is hard to understand, but when dealing with punishment and consequences, you can't make it up as you go along and treat each case on its own. You have to follow your district's policies. This was a total failure on the part of the policy writers for the district. They simply did not leave an out for the district on very serious situations like this. I assume it went to progressive punishment and if this was the first or second offense, then the punishment was not very heavy. And, if Iowa is anything like Minnesota, most policies are based on recommendations by the state's school board association so I would guess most schools in Iowa have a similar set of policies.
I totally understand everyone who is saying the coach should do something, the principal should do something, the superintendent should do something and/or the school board should do something. They can only do what their policies allow. More than that, they will get sued, a judge will allow the athlete to compete while the case is being prepared, the district nearly always will lose, the kid will still get to compete, and the district's insurer will pay out. Insurance rates go up and more of our tax dollars go that way. This is what the district's attorney is telling them.
I was also a former coach and where I would have started in this district would be to see what the handbook for the wrestling program said about issues, as coaches often have clear rules and expectations set as to what it takes to be a member of this team. I would always include for the more serious things that "discipline may include being removed from the team." Student athletes and their parents would sign it so there was no confusion as to what the expectations would be. I know that does not sound like much, but that is the type of starting point that is needed.
Again, a very unfortunate and frustrating situation. I see the district is already reviewing policies and I am guessing most districts are doing the same as this has become so public.