Every aspect of this situation is dysfunctional, and the older sister is justified in removing herself from it.
It’s difficult to see your parents treat your siblings differently from how they treated you. It’s common, especially when there’s an age gap of over 10 years between siblings, for parents to mellow out once their youngest kid is a teenager. They figure, «Nothing horrible happened with my oldest kid, so why should I have to put such stringent rules on my youngest?» Additionally, as parents age, they often lack the energy they once had, which may also make them less likely to draw clear lines about questions like, «Can I go to a party tonight?» It’s much easier just to let your teenager go than to ground them for having the audacity even to ask permission for such a thing.
Just because your parents let their youngest kid do whatever they want doesn’t mean that you need to be a party to it. They might be willing to drive them home from a party at 3 AM, no questions asked, but it’s totally understandable if you want nothing to do with that.