I'm quite certain this is nothing more than rumor, and has nothing to do with "tree huggers", "hippies" or any other stereotype group you want to conjur up. It's most likely started by some company that makes soft baits without using plastic material - probably as some sort of stupid marketing ploy.
I've seen garbage like this before and it always backfires ("banned in tournaments!" , "banned in 10 states", etc), so I have no idea why companies continue to indulge in these useless, false advertising practices.