It's a plothole. That's definitely a hat. But Toad would look weird as hell with a bare head.Toads are seen wearing hats on top of their bulbs in the Mushroom Kingdom and some talk about wearing these hats as if it's a hot new fad (implying the bulbs were not considered to be hats)
A Bonneter NPC (aka Cappy's species) "captured" a Toad without taking off his head bulb. Bonneters can only rest on a bare head.
Also, there's the Toads that wear headphones on their bulbs located throughout the game. How does it listen to its music?
Where does Era side on this? I'm #TeamHead.