trouble with the law: inducing panic question.?

[countercultured]

About 250 kids (50 teams of 5) at my school have arranged one giant game that takes place EVERYWHERE called Nerf Wars. The only off limits places are: work and any school grounds. What happens is, everybody buys nerf guns http://www.hasbro.com/common/images/news/transformers/megatron_blaster.jpg the bullets are made out of hardened foam and the point of the game is to be sneaky and find out where your opponents are and basically find them and shoot them with the gun (being shot is 100% painless)

Yesterday, some kids participating in the war, went to sunspot tanning and planned to get somebody when they were coming out of the salon. One of the kids had his nerf gun tucked away in his sweatpants while waiting for the opponent to come outside, when a passer by called the cops who surrounded him and nearly arrrested him for "inducing panic" can you really get arrested for having a nerf gun?
I forgot to add this, but the time of the game now went from 3 months to 1 month because of what happened. police officers say that if they see anybody with a nerf gun even if they are walking down the neighborhood street..they can be arrested. it just seems to me like this is crossing the line. nerf guns are NOT firearms!!