Water crystals are generally made of polyacrylamide which is inert but is made from acrylamide monomers by chemical reaction. Acrylamide is a known neurotoxin.
There are two things to consider: quality and deterioration.
In high quality water gels (such as used for human food products) the levels of allowable unreacted monomers are very small, however agricultural uses like miracle grow products or ones sold in bulk for soil amendments have a much higher allowable level and may be unhealthy for long term consumption.
Crystals can also deteriorate with age, exposure light and air, and some mechanical processes. This would potentially result in more toxic compounds over time.
Insects eat the plastic gels and this could be passing the chemicals down the food chain. How much or what duration of exposure is needed to result in lethal or sublethal neurological effects is unclear. (There is published information about the effect on mouse models though) I find it easy enough to provide other means of
hydration that I've stopped using the crystals.
Dry crystals can also be dangerous if consumed (for example if a dry crystal clings to a cricket) since they will pull moisture from the body as they rehydrate/expand and can result in death, especially for little dragons.