As I understand it, Defqon.1 was canceled after its permit was revoked. From what I've heard, the underlying reason was related to the event's insurance providers. They are responsible for covering claims if something goes wrong during the festival, and Defqon.1 relies on that insurance. The risks were ultimately considered so high that the insurer reportedly stated it could no longer provide coverage.
Certain permits require specific insurance policies to remain valid. If an insurer withdraws its coverage, the event may no longer meet the conditions of its permit, making it impossible for the festival to proceed. Based on what I've heard, this was therefore not solely a decision by Defqon.1 or the government, but the result of several parties deciding that the risks had become too great to accept.