The FAA won't ban something unless there's a safety component. Light is covered under the FDA (surprisingly) and there's an interest Defcon talk about jamming Lidar guns (https://www.youtube.com/watch?v=vQtLms02PFM). If you made the argument to the FDA that the lights from the drones are a safety issue... it could be done.

Presumably the city could enact an ordinance banning and fining an organization for an areal stunt regardless of if the FAA approves. Of course a city can’t make laws to alter how a federal agency regulates something, but that doesn’t ban there aren’t other avenues.

Flying aircraft in formation is gonna be hard to argue as a hazard... honestly the "light polution" argument would probably be the best one.