Their argument is that some people believe that the name is discriminatory, anti-Semitic and anti-Israeli. I am by no means an expert on the topic of Israeli Apartheid (according to my spell check, I hardly know how to spell it), but I would like to make a few comments on this anyway.... and anyone with more knowledge who wishes to add/clarify/correct something is more than welcome to comment.
Let's start this very simply... from wiki, the crime of apartheid is "committed in the context of an institutionalized regime of systematic oppression and domination by one racial group over any other racial group or groups and committed with the intention of maintaining that regime." United Nations reports seem to consistently show that the current regime is comparable to apartheid in South Africa (see here)
This is not anti-semitic. Antisemitism defined (again using wikipedia, which may not be the most reliable source, but I believe is useful for this purpose) is prejudice against or hostility towards jews, often rooted in hatred of their ethnic background, culture and/or religion. I don't understand how being opposed to the oppression of a group of people based on their race/ethnicity can be confused with hostility towards a different group, some of whom happen to be part of the dominant group in one particular country.
I can only think of two explanations. First, is ignorance. Those who are confusing the term "Isreali apartheid" with antisemite do not understand the meaning of these terms or the living conditions of Palestinians in Israel. But the politicians do understand this, as do the organizers of Toronto Pride, I am sure.
The other explanation is financial. The current Israeli regime is backed by the American government. Just two months previous to this decision, the Ontario legislature passed a resolution condemning Israeli Apartheid week, which is held at several universities. Last month, the federal government withdrew $400,000 in funding for Toronto Pride, a decision that is rumored to be connected to QuAIA. Now, the Toronto mayoral candidate motioned to deny funding to the parade if QuAIA is allowed to participate, on the grounds that it would be in breach of the city's anti-discrimination policy. Directors at Pride were concerned about the risk of losing this funding.
Queer Ontario founder and spokesperson Nick Mulé states
It appears Pride Toronto has opted to appease some City officials applying pressure based on misinformation regarding QuAIA and the use of the term ‘Israeli apartheid’, rather than work directly with the community in educating the City to develop a nuanced understanding of the human rights and discrimination issues at play.
I have heard it argued that Israeli Apartheid isn't a Pride issue, as it is not directly connected to sexuality or heterosexism. This argument is used to keep leftist movements separate, which means that they are containable. When organizers at Pride are separated from those at QuAIA, which are separated from feminist organizing and from socialism, it keeps special interest groups small enough that they cannot disrupt the status quo. I would like to applaud QuAIA for becoming involved with both groups, for building that coalition, as I believe it is only through these coalitions that change can occur.