The whole discrimination is actually propaganda by the founding king.
The 'demon lord' was actually a human serving the country during its founding, but the 'hero king' got paranoid and ostracized him.
Then, despite the demon lord never actually doing anything bad, eventually attacked and sealed him.
(yes, the demon lord area was part of the country back then, that's why there's a castle there)
It's part of why the king is really nice to Eumi, he's aware of the truth and how this current events is heading towards a repeat of that so he want to prevent it.
He accidentally blurted out about avoiding a 2nd demon lord which left Eumi confused since she only knew about one of them.
He told Eumi that he feels it's not the time to explain it, and Eumi trust him enough to leave it at that.