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Unless they were doing so with the permission of the copyright holder (eg the T&Cs of the Kindle bookstore allow you to read books on any Kindle registered to the same Amazon account), I believe that would indeed be the case, yes. Having your child's Kindle registered to your account and sharing books between the two devices is fine, but buying a book on your device, stripping the DRM, and transferring it to a different device not associated with your account, is not.
Don't get me wrong - I don't think that what you're doing is wrong or unethical; I'm just not sure whether or not it's legal.
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