I avoid any pvp online game exactly for this reason. if you open your mouth to call out, you just became a target. it's so normalized now that I have sworn off multiplayer games altogether unless they're co-op and I can play specifically with friends.
So!!! Much!!! This!!! The blatant racism and transphobia that is endlessly spewed in all multiplayer games is simply disgusting. The racist and transphobic players need to be held accountable. Permaban them, hardware ban them, report them for hate crime. Simple as that.
Reliable enforcement beats harsh punishment, when changing people's behavior. I tell forum mods to hand out three-day bans like candy. It's long enough to sting and short enough to shut up and take it.
And seriously - you are game designers. Modifying people's behavior through expectations is your job. Your power is so immense that charging money inside the game should probably be illegal. Find better tools than a permanent boot in the ass.