How to restrict category creation to admins only while allowing editors to still pick category

This has to do with the capabilities tied to the current user role.

In your case you are looking for manage_categories capability.

Option 1)
Install a Plugin, which enables you to edit the capabilites (Just “Members”, best plugin for that in my opinion, or “user role editor”.)

Option 2)
WordPress has this separation already build in.

“Editors” can manage categories.
“Authors” can not!

So, you only would have to give the users the “Author” role that should be enough to restrict it.

Option 3)
Do it via code in your functions.php with something like:

<?php

    global $pagenow, $typenow;

    if(($pagenow === 'edit-tags.php') && $typenow === 'taxonomy') {
        if(!current_user_can('manage_categories')) {
            // Do whatever you want them to see.. redirect to home or whatever
            return false;
        }
    }

I havent’ tested the code above, but that should be the direction to go.