I think they're talking about creating a different govnernment for native Hawaiians, similar to how various tribes operate on reservations on the mainland.
We were tourists at Iolani Palace across from the State Capitol on June 7 and there was a rally going on for the Free Hawaii movement and they were waving the Hawaiian flag upside down. We noticed a couple places on the Big Island the state flag was flying upside down and wondered why. They must have been supporters.