This stupidity will die in court. The first class that has >1 student denied a diploma will form the basis of a class action; Chicago is filled to the brim with the sort of lawyers that will not hesitate to argue that this policy is discriminatory due to the minority demographics of the district. They'll be climbing over each other to get the case. If you are a Chicago student that may graduate under this policy and do not otherwise have plans you could win a nice settlement by setting yourself up to have your diploma denied; the lawyers will be looking for a poster child. Groom yourself and practice some lines about how your "future is in jeopardy" because you can't get your diploma. This stuff writes itself.
The whole thing is so obviously infeasible that all the possible explanations one is left with for how Chicago's leadership thought it was a good idea to float this trial balloon are cynical. Maybe they really are that profoundly naive... Maybe they think the citizens are dumb enough to give them credit for trying... Maybe it's a scheme to embiggen student financing. Which of these is the worst?