TSA Blogger Bob explains the TSA/"law enforcement" logic (my highlights):
An odd watch that was discovered at Oakland (OAK) a few days ago has been creating quite a bit of chatter on the web. As you can see from the picture, this is not your everyday watch. If I could show you what our employees saw, you would see that it looked even more nefarious to our officers viewing it on the X-ray monitor.
From comments I’ve read on the web, some think we overreacted to a piece of steampunk art, while others understand why we would be concerned.
Is this watch dangerous? Not at all. However, we didn’t know that until the explosive detection team arrived and cleared the item. You see, when something is considered to be a potential deadly threat, it is protocol not to open the bag.
Terrorists take everyday items and attempt to manipulate them to make improvised explosive devices. Our officers are trained to look for anomalies such as this one.
After clearing the watch, law enforcement officers (not TSA) made the decision to arrest the passenger. TSA officers do not have the power of arrest.
Please take a moment to think about what you’re traveling with and how it might appear to TSA. I happen to think this watch is pretty cool, and I’m a fan of all kinds of art and homemade DIY gadgets, however, they’re not always the best things to travel with.