It's legal to watch hand signals and send that info to the team. However, teams aren't allowed to use equipment to speed up this process -- the watch was an illegal shortcut.

The Red Sox have reportedly owned up to the practice in private, but they've apparently returned fire by filing their own complaint accusing the Yankees of using a camera from their own TV network, YES, solely for the purpose of stealing pitch signs. Either way, it's likely that MLB will do something. While the parties involved are declining to comment, it's hard to imagine the league simply letting the status quo persist. Right now, it would be all too easy for other teams to follow in the Red Sox's footsteps -- we wouldn't be surprised if the MLB banned smartwatches in the dugout to be on the safe side.