Wrist-detection on the Apple Watch is supposed to ensure that it will ask for the passcode if removed from your wrist, but as a YouTube video posted by iDownloadBlog demonstrates, a thief is able to reset the watch without having to enter the passcode. They are then free to pair it with any other iPhone.
iPhones are protected by Activation Lock, which means that even if a thief performs a hard reset of the phone, it cannot be reactivated without the original owner’s Apple ID and password. The Apple Watch, however, has no such protection, and does not require a passcode to wipe it – as shown in the video below …
Since Activation Lock was introduced in iOS 7 and turned on by default in iOS 8, there has been a dramatic reduction in iPhone thefts around the world, officials noting reductions of 25% in New York, 40% in San Francisco and 50% in London.
The Apple Watch is theoretically protected by a passcode which has to be entered if the device is removed from your wrist, but an apparent bug allows a hard reset to be performed without it.
A hard reset is carried out by a long-press of the Contacts button until a power-off option is offered. Force Touching this option brings up a dialogue offering to erase all contents and settings, which can be executed simply by placing the watch on the charger – no passcode required.
I verified this with my own Apple Watch, and it works exactly as shown.