This was obviously an overreaction, and 30 years on, the Secret Service looks laughably incompetent, but it isn't that outlandish in context. Blankenship was in Legion of Doom, which was deeply inside critical computer systems for most of the 80s, including banks, military facilities, telcos, and other vital infrastructure. They published and disseminated how-to guides for infiltrating systems, and they were active on underground BBS systems. Blankenship may have moved away from illicit activities, but he still communicated with the same people, and SJG's BBS was swarming with elite hackers.

Yeah, the Secret Service should have been savvy enough to figure out that it was a harmless game, but they were still playing catch-up. Given Blankenship's history and the cross-section of criminal hackers and the SJG BBS, it doesn't surprise me that they raided them.

During the glory days of 80s hacking, groups like LoD and a handful of others had access to things that would scare the hell out of the public today. Imagine what a huge news story it would be today if it was announced that a single group of hackers had access to systems that control power grids, telcos, credit bureaus, banks, military bases, and all manner of other corporate and government entities. That's really what it was like back then; a bunch of teenagers infiltrating everything plugged in.

Most hackers back then were just exploring and learning. I'm not suggesting that Blankenship or LoD did anything all that nefarious; they certainly weren't out to bring the system down, and they didn't take advantage of their access for any financial gain that I'm aware of (discounting theft of services to the tune of a few hundred thousand dollars worth of phreaked phone calls).

It's a funny story about an interesting time. I'm inclined to cut the gov't a little slack for overreacting because the potential for harm (from hackers) was high, even if few of them harmed anything. If Blankenship had been a known criminal in meatspace, and was hanging out with his criminal buddies at their social club, you might not be surprised if the feds raided them once in a while.