You’re right that states can’t regulate the airspace itself, that’s strictly under FAA authority. What Tennessee is doing here is leaning on its state privacy statute:
SURVEILLANCE BY UNMANNED AIRCRAFT (§39-13-903), which makes it unlawful to capture images with the
intent to conduct surveillance. One part of that law specifically applies to events with 100+ ticketed attendees, like the fair.
So, from the state’s perspective, police aren’t seizing drones because they’re simply “in the air.” They’re acting under the assumption that a drone over a crowded event might be attempting surveillance, which gives them grounds under the statute.
Separately, FAA rules already prohibit flying over people without a waiver. That means both state law and federal regulations could come into play, LEOs can act under the TN law, and the FAA could still fine the operator.
What keeps any entity from expanding any law for any other reason? What you’re raising is a
slippery slope concern, that if the state enforces this statute at the fair, it could open the door for broader restrictions later. If the legislature ever tried to expand it beyond that, it would have to go through the normal lawmaking process and would likely face legal challenges, especially if it conflicted with FAA jurisdiction.