I am going out of a limb in saying this, but here goes.
Maybe cause Riot actually hope people being toxic would still change and be less toxic. Gasp! Having faith in their player base? Riot you insane!?? D:
What I mean by that is, in comparasion between a ban and a communication restriction, what would cause more fear/more like an actual punishment to said offending party? Well a ban of course.
So if a ban is more like a pusnishment what does that mean? The offending party would become more alarm to their offense and hopefully would be more aware to AVOID causing the same mistake as before. Thus what I meant, Riot still actually hope toxic player would change.
And at the end of the line, if the toxic player have repeated offense, then a perma ban would be given out. I think that is how that works? In which case, it is basically they are beyond redemption and Riot would rather not having them degrading the gaming experience of other players further than giving them another chance to change.
And yes the mute button is there, and yes people do use it. But no that is not a reason to justify someone else raging in chat being ok. It's like asking someone to avoid a dangerous neighbourhood cause there are criminals gathering there. Should we avoid said neighbourhood? Yes. But does that mean we should not round up the criminals? Absolutely no, they should be caught. So similarly someone raging in chat is not a justification for the mute botton solving everything, the offending party should still be punish.
That, is my opinion more or less.