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Is this legal? Seems a great way to distract other drivers.

It only works when the car is stopped and the driver is outside.

I can think of a bunch of scenarios where that concern doesn't apply, and so can you.

Of course, but I am positive plenty of "look at me" types will drive around with it[0]. And I'm sure you know that, too.

[0] If possible. I don't see where they explicitly say you can't.

The light show doesn't engage while driving, so no.