Am i wrong or overreacting?

i consider myself one of the lucky mothers i have to work but my mom watches my daughter 2 days a week and my mil watches her 3 days a week. recently my daughter has been coming home from my mils very agitated and i finally figured out on saturday why. there have been a few changes in the household during this month with my 30 year old sil who is a college professor being in town 2 or 3 days a week while on break and my 26 year old sil who is a student being on break. but i just had no idea what was going on until sat night. we had a really nice family dinner and by 7 o clock my 2 year old was just partied out. so i took her in a different room and got her crayons and a coloring book and was letting her unwind. the 30 year old sil walks in and grabbed a crayon and my daughter said "no me" so i told her nicely "please just leave her alone this has been a busy week and shes tired" so in walks my 26 yr ols sil same thing. so instead of just letting it go the 26 year old walks over to the 30 year old and starts going "hey peanut this is my (fake names sorry) jane you cant look at her or talk to her" so the 30 year old sil chimes in doing the same thing "hey peanut this is my sally you cant talk to her or look at her as a matter of fact you go in the other room" then they procedded to get coloring books and crayons, while i was telling my 2 year old it was ok and to relax and just color with mommy, and sat 2 feet away from my daughter and started going hey peanut look at our book come here so when my daughter walked over they closed the book told her she couldnt see it or play with them and pushed her back. so my daughter hit them just as i opened my mouth to intervien, the 26 year old grabbed her and shoved her in a corner and told her she couldnt move until she apologized i took my child out of the corner and told them, this was horrible and i dont like this kind of talk but i was upset "she hit you because shes 2 and doesnt have the verbal skills to tell you to f*** off" meanwhile my mil says oh they play like that all the time. my daughter does not know there playing and she is lashing out at them. i was so shocked that she would allow that to go on i walked out of the house put my daughter in the car and called my husband and told him we were in the car and we were leaving now. i dont know if i should confront my in laws head on or if i need to unfortunately make other daycare arrangements. any thoughts?