If, as the Pope contends, the Knights of Malta are a religious order within the Church, then you are entirely correct. However, the Knights contend that they are a sovereign nation, which is supported by 900 years of history as well as a treaty with the Vatican. If that is the case, the Pope has no more business directly ruling their government than he would running any other civil government. He would have the authority to ban Catholics from membership or to prohibit the use of Church premises among the many religious sanctions he could impose. But to depose their leader and declare himself the head of their government is bizarre and unprecedented. It will be interesting to see if there is any resistance to this and also if Cardinal Burke is among the targets of this (as presumably he is).
They’re Catholic. The pope (if valid) rules over them. Period. Read Vatican I.