Firstly, why would they even want to do that? It would only agitate the people who had fought and died under that banner. This is akin to asking why the English don't ban the Scottish flag, or for that matter, why the US doesn't ban Native American symbols.
That being said, following the War, the South was under military occupation until 1877, a period referred to as Reconstruction. During this time, the Southern people were stipped of their Constitutional rights, including the right to vote and right to free speech. The display of Confederate symbols, and the wearing of Confederate uniforms, were banned during this occupation. However, such rights could not be stripped permanently, because the US Constitution protects the rights of citizens to freedom of expression. So once the occupation ended, full Constitutional rights were restored to the people of the South.