I do not think that a Form 1 grenade will be approved period, as it is likely a violation of 941.31. However, I have a hunch that if all other explosives regs are followed (and they do not preclude ownership), a 40mm explosive DD may be allowed.
941.31(2)(a) In this subsection, “improvised explosive device" means a destructive explosive device capable of causing bodily harm, great bodily harm, death or property damage; with some type of explosive material and a means of detonating the explosive material, directly, remotely, or with a timer either present or readily capable of being inserted or attached; which may include a pipe or similar casing, with the ends of the pipe or casing capped, plugged or crimped, and a fuse or similar object sticking out of the pipe or casing; and made by a person not engaged in the legitimate manufacture or legitimate use of explosives, or otherwise authorized by law to do so. “Improvised explosive device" does not include ammunition for any rifle, pistol or shotgun.
Let's say you own a shoulder fired 40mm with a rifled bore. Per federal law that's a DD. But what is it per state law?
941.28(1)(a) “Rifle" means a firearm designed or redesigned, made or remade, and intended to be fired from the shoulder or hip and designed or redesigned and made or remade to use the energy of a propellant in a metallic cartridge to fire through a rifled barrel a single projectile for each pull of the trigger.
941.28(1)(b) “Short-barreled rifle" means a rifle having one or more barrels having a length of less than 16 inches measured from closed breech or bolt face to muzzle or a rifle having an overall length of less than 26 inches.
I am not a lawyer, this is not legal advice, but I believe an argument could be made that it is a "short-barreled rifle" under WI law. And if it is indeed a short-barreled rifle, it's ammunition cannot be an IED per 941.31(2)(a).