To be honest, I don't have a problem with Innokin making this. It can be a cool mod to have on the bar in your man-cave (do people still use that term?) or when you're watching a football game with your buddies.
I would have a problem with someone bringing this out in public, when you're in a crowd of people who don't know you. The concept of "Reasonable" is well established as a legal standard, particularly for situations involving (real or percieved) threats. As in "Reasonable Man" or "Reasonable Expectation".
Whether it's a cool fire, or a child's plastic hand grenade, strangers who see you pull it out do have a reasonable expectation that they're being threatened. And the reaction is likely to be dangerous to the public if people start running away, pushing each other, crowding the doors, etc. It's the same principle as yelling "fire" in a crowded theater when there is no fire. And to be honest I would have little sympathy for someone who got arrested for pulling one out in public, or for causing an airport shutdown, etc.
Come on, let's be reasonable here. Even if you have a license to carry, if you take a replica gun and pull it out of your belt in a bank, you should expect the people around you to feel threatened, and to react accordingly, and you shouldn't feel that because the threat isn't "real" that it's OK.
I don't blame Innokin; I think it's a product that has a valid space in the market. But that doesn't mean it's cool or funny to whip it out in a crowd.