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I think the episode implies ethical issues, but stops well short of spelling them out. The fact that Kingsley concealed the childrens' true natures for as long as she did suggests that their research was not on the up-and-up.
My best guess is that the station's research, on paper, fell within Federation regulations, but their actual work did not. But that's stretching pretty far, given that no one explicitly raises the issue.
My headcanon is that the ban on genetic engineering is mostly an Earth law, rather than a Federation law. Which makes sense if the reason for the law is Earth's experience with augments, as Phlox points out that other species have used it without the same dire consequences. This jives with the fact that only humans living on Earth are ever depicted as being bound by the law. It's not a perfect theory, but it does explain why Bashir's father was imprisoned but the Darwin station researchers were not.
it does explain why Bashir’s father was imprisoned but the Darwin station researchers were not.
Does it?
The Darwin Station researchers are human, as are their augmented subjects. Julian Bashir does not live on Earth at the time his augmentation is discovered. The Bashir family did not get this treatment done on Earth, and given the extreme lengths they went to get Julian treated, alongside Richard's documented inability to keep a job consistently, it would have been utterly insane not to move to a different world (instead of a different city on Earth, as they actually did) after they got the treatment if this would also free them from any risk of legal repercussions.
Further, Strange New Worlds explicitly refers to this as a Federation law, and the principal reason why Illyrians are not welcome in the Federation.
I agree with you. However, playing devil’s advocate, it could be argued that the law was applied because Bashir is a citizen of United Earth within the Federation, meaning that per the Prime Directive, Earth can enforce its own law within the bounds of the Federation constitution (perhaps with some limits on enforcing certain parts on non-United Earth citizens, especially in a zone like San Francisco).
International Waters in the 24th century?
That then begs the question: Why did they have a problem with Una, a non-human augment, joining Starfleet? In PRO, it is also implied that Dal would not have been let in if not for Janeway’s push.
Also, perhaps Darwin Station required a longer investigation to check which researchers were involved, so the arrest does not happen on screen and is left for another ship (after all, the D needs to keep boldly going, so I can imagine a Miranda swopping by later to do the arrest for the Enterprise).
My best guess is that you have to learn how to be a criminal in order to catch criminals.
A cop who investigates burglaries has to know what a lockpick looks like, and the bunco squad has to know about confidence games.
The directive was probably something like "figure out the genetic markers we'd have to look for to identify aberrant humans." imho
The idea of deliberately creating otherwise illegal augmented people purely for the purpose of making it easier to systemically identify other augmented people is so brazenly unethical, I am at a loss for further comment.
It's been a while since I watched this, but I believe they were toeing the line when it came to the ban. Like, they're not looking to create a superior being or advance the human race, but more to study and eliminate particular disease and sickness.
Unfortunately, there was definitely more going on than that. The genetically modified children were telepaths who could move physical chess pieces with their minds.
This is one of those times, like the Klingons joining the Federation in TNG: "Samaritan Snare", where the only explanation that makes sense is the Doylist one - that the writers didn't know about the ban because it wouldn't be established in lore until DS9.
The only Watsonian explanation I can come up with is that the Federation for whatever reason made an exception in this case. Or perhaps Darwin went beyond its remit by “creating” the children and despite that Picard and Pulaski chose to focus on the immediate problem of the aging disease and to deal with the illegalities later.
But the Doylist one is much simpler.
"Because otherwise there wouldn't be a mooovie."