This is about to happen in the next session we play. They are 100% gonna have a run in with the authorities when they sail into port, and it's gonna be up to them on how to deal with it. I would love for them to befriend the knights, but I know at best they'll spend a night in jail, and at worst they'll be hunted down like stray dogs by every Knight in the city. They're learning, though. A month ago I wouldn't even bother brainstorming alternatives, because they'd just fight everyone without thinking and wind up sleeping outside the city, again.