Not at our campsite. Cub scout rules are clear on knives; can't have them without the chip. Consider the principle that a knife is a tool, not a toy. What tool purpose is served when throwing knives? I see no reason to throw a knife except for the purpose of injuring someone, and I will never tolerate that at a scouting event.
I teach my cubs that Cub Scouts follow rules. Period. I don't accept it when my son asks me for something, I say no, then he asks mom, and mom says yes. I expect all the akelas in my den to follow the same rule. If a cubs akela wants to do something else, they can go do it elsewhere. I am responsible for my cubs safety at a campsite, dad is only responsible for his son and usually doesn't think or care about my additional responsibilities. I won't make exceptions to rules because *one* dad doesn't like the rules.
So to the OP's question: I'd get another akela, go stop them and tell them why. If they don't want to stop, I'd enlist the help of the event staff to take care of the issue and make my position known. What the staff does, it's their call, and out of my hands.