Every parent has a right to make his/her own parenting choices. But it's possible that your sis-in-law was making the request simply because she wanted her child to be more agreeable to the rule.
For example, I have a very strick rule about holding my kids' hands in parking lots. They are never allowed to go off by themselves (at 3 and 4 years old, anyway). But my SIL is a lot more lax about that rule and lets her three year old run free, though she does try to keep her close.
I can totally respect that. I really can. Not every parent is cautious about the exact same things and I would never lecture my SIL about it or ask her to start enforcing MY rules on her child.
BUT....is it harder for me to get MY kids to follow MY rules when they see their cousin running free?
Absolutely.
So maybe your SIL isn't trying to push her rules on you so much as she is trying to get her own kid to cooperate. I don't know, just a thought...