Yes, that story has been thoroughly debunked.

It was a false claim that started as an online hoax. After multiple news outlets including Q13 Fox and the Seattle Times investigated and found it to be untrue, the police retracted their statement, but the damage was already done. A lot of people who have no idea what's going on in Seattle still believe it, unfortunately.

See https://www.businessinsider.com/seattle-police-retract-claim-of-autonomous-zone-extorting-businesses-2020-6

and

https://www.seattletimes.com/seattle-news/seattle-area-protests-updates-for-thursday-june-11/