The danger is that in the event of an aborted take off at high speed the baby could come free from your arms.
Additionally, if you really followed instructions and kept the baby in your arms and hit severe turbulence, you could potentially lose your grip on the baby.
Please google United 232 Jan Brown. You will see she has been on a personal mission to require car seats.
Here is another quote:
"In severe turbulence, you will probably not be able to hold your child and they will fly through the plane, often straight up," Tom Gibson, a visiting professor at the University of Technology Sydney.