After collision drone should shut itself down and drop like a rock. Looks like it wasn't the case here. And there should be nobody on the ground below, of course. Flying over that lake would be safe
Why should there be nobody on the ground below? Other kinds of aircraft can fly over people. Quadcopters are much easier to control and stabilize than other kinds of aircraft.
Other things that fly overhead aren't allowed to put 200 in the air all within 700 feet of each other, purposefully inches away performing acrobatic acts.
All of these heavy machines in the sky rely on a ton of things going right at once not to collide... software, hardware, weather, etc.
There are different rules for flying in an airshow [1]. Here's a very crude summary.
There's a designated area where the aircraft do their show in and there are not supposed to be spectators in that area.
Airshow craft can fly over spectator areas but not when doing anything dangerous and if they are high enough.
The US actually has some of the most stringent airshow safety rules in the world, which is why most of the time when there is an accident that kills a lot of spectators at an airshow it is not in the US. Plenty of pilots have been killed in US airshows, but the shows are carefully planned so that if something goes wrong the planes should crash away from spectators.
I don't know if drone shows are subject to the same rules.
If the article title didnt make it apparent, people can get seriously injured or killed when they plummet. Also I believe its illegal to operate a drone over humans without very specific exemptions.
Other aircraft are also inspected regularly and have regulations to follow, there isnt much of that for drones, any shmoe can fly their modified flying blender
My point is that no, it's not illegal based on type of aircraft - it's legal if you have the proper pilot license. And it's not hard to get it (few weekends of study).