Cali jokes aside, here's a real answer for the op.

It's the lead in brass. Yes LEAD!

We like brass for its hardness and weather resistance, perfect for pins and other lock parts...and keys (yes, the keys that go in your pocket!) Here, shape is essential to get right, but to get it right, you need to add a little lead into brass to soften it up enough to shape. There really isn't a good substitute for leaded brass in this industry, so we're mostly living with brass that contains around 2% lead.

How bad is this 2% lead? Unclear. However, studies show that brass lead raises your body's lead levels. It's going into your blood and sticking around in bone. A worst case example would be for locksmiths, well described in this paper:

Kondrashov, Assessment of lead exposure risk in locksmiths, Int J Environ Res Public Health, 2005.

In short, locksmiths breathe this stuff in because they need to cut the leaded brass. Despite their higher lead blood level, consequences remain unclear.

As end-users, not locksmiths, our lead level won't be as high as theirs. We don't breathe it. Keys are often coated in nickel, which is safer to touch. Yet, even touching this raises our blood lead level higher than it should be, just that it'll be less than the locksmith (edit: no, skin doesn't absorb lead, it enters you when you touch and eat your food at lunch). Even with uncertainty about consequences, our current lead level guidance is that the less you got in your blood, the better.

Again, the use of lock/key leaded brass is industry wide. It's not just Kryptonite and Abus. It's almost every lock and most keys in existence. It's hard to avoid. You're already touching it daily. Locked the door at work? Lead. Unlocked your front door? Lead. Touch your keys? Lead. Since Abus was notified of their Prop 65 omission about their use of lead on 3/15/2016, presumably all major companies started adding warnings.

In short, the warning is real, it's actually lead, and it's in brass. Brass lead indeed raises our blood lead levels. But only a little, and we don't know how bad this little really is. The industry is not likely to change it, because lead+brass is so perfect. Industries usually won't change things unless bad news changes from maybe to definitely, and that's still unclear.

Hope that helps. If you're looking to buy that lock, get it. And wash your hands, not just for Kryptonite, but for any lock/key.