Option 1 is more strict in both ways. Only Terrorism (which is more serious than "just" crime) and even then only with a warrant. Option 2 is unacceptable (IMO). "serious crime" is too ambiguous and without a warrant prone to misuse.
At least that's what I'm reading into this. Picking option #2 was my personal "f..k y.." to them for this manipulation; not that it changes anything. (I really don't want to have a company share info without a warrant, but when a court warrant is issued they should comply).
It's worth noting that a lot of fringe extremists (but not necessarily terrorists) fled from WhatsApp to securer alternatives like Signal and Telegram, especially "COVID deniers" (which, to be clear, refers to a far-right political strategy). So blatantly ignoring warrants is probably good publicity for a vocal part of its userbase.