There are two drawbacks to this technology, in my opinion.
Fully agreeing to the first,not knowing about the second, I'd like to add two more:
3) flarm is not governed or controlled by any normative body, it is anybody's guess wether today's equipment will work tomorrow. If it doesn't, there's nobody to blame.
4) flarm uses consumer grade electronics for the essential radio data link - which neatly explains the low cost - if comms fail, again there's nobody to blame.
All in all, flarm offers worthwhile information with perhaps 90% availability, and nobody should reject it - the danger is to believe in it 100%.