I only think this is true if the hackathon is around projects that are part of or similar to the normal work. In those cases, they should be during work hours and treated as work.

My company 15 years ago or so did a hackathon with arduinos, where they provided a bunch of arduinos and hardware and food, but the projects we made were completely unrelated to work and served no practical purpose. My team made a Simon says game.

It was just for fun, there was no benefit for the company. I think those are fine.