For many years Israel banned the Palestinian flag. They still confiscate them, when they feel like it.

Yet, flying the Palestinian flag was judged to not be a criminal offence by Jerusalem’s Magistrates Court in September 2021. The court ruling was issued following the arrest of four people who were flying a flag, Haaretz reported.

Police, however, regularly confiscate Palestinian flags on the grounds that they could lead to “a serious disturbance of the peace”, the news organisation reported.

Following the 1967 war, Israel seized control of the Gaza Strip and the West Bank, and later annexed East Jerusalem – a move that was never recognised by most of the international community.

It was at the time that Israel banned the Palestinian flag from being waved in occupied territories and a few years later, even banned its depiction in any artwork.

To circumvent more recent repression of their flag and national colours, Palestinians have creatively resorted to carrying sliced watermelons in a sign of protest, making the watermelon a symbol of resistance to occupation.

https://www.aljazeera.com/news/2022/5/13/why-is-israel-afraid-of-the-palestinian-flag

Green, black and red are the colors of the Palestinian flag

Israel and zionist countries banned Palestinian flag displays, then they banned Palestinian flag colors on clothing, so now protesters slice open a watermelon and carry it around (Red, Green, Black) as the zionists can't make it illegal to have a watermelon.

It’s illegal to fly the flag some places, so they used at as a symbol for the reason OP answered.