Paper wheels were not outlawed. IIRC they fell out of favor about 10-20 years after their initial introduction due to being a maintenance headache. Water intrusion in poorly made/maintained wheels (as one would expect) causes softening and rot of the compressed paper filler, requiring frequent inspection and/or replacement. Well made wheels not subjected to heavy use will keep their integrity for a long time (see those still on equipment as mentioned), but without careful inspection failure would only show up catastrophically as the paper is enclosed behind thin metal plates. They are also not very compatible with high speed service. The Germans tried paper/composite wheels on their high speed trainsets back in the 80s or early 90s - after being advised not to, IIRC - and suffered a major derailment as a result. Wheel came apart at speed on a switch, IIRC. The tread parted and an 'end' stuck in the switch, straightening it and causing it to snake-head into the carbody - akin to early RRing's strap rail problem - and the train went all over the farm, including a OHBR abutment.
For the ng equipment out there, 49CFR215 (Freight Equipment) applies specifically to standard gauge equipment - which gives them an out, unless FRA decides to stick themselves into it. The only problem in 215 that might come into play if they did apply to ng operations is the ban on cast iron and wrought steel wheels (Appendix A). 49CFR238 (Passenger Equipment) does not apply to tourist/historic/excursion operators and doesn't contain anything about the subject anyway. There is no mention of banned wheel technology in 49USC203.
Your mileage may vary...