You can make this a huge big issue, its up to you. But there are consequences if you do. Your friend might be more embarassed by bringing more attention to his style then he wants. The opposition might just escalate beyond normal league policing. No one is going to quit the leauge. And if by chance they do, they will do so owing money to the leauge (GUARANTEED). The last option, IMO, is that they will quietly accept his style after you have confronted them no matter how you do it. But if bowlers and teams leave, then the league will be restructured the schedule restructured, you might now have a blind team. And all over a battle that you don't even know your friend wants you to fight. Now that might be worth it to you I don't know. But keep in mind that right or wrong, leagues generally don't like "drama" and will disassociate themselves from it if they can. An extreme case is that your friend and you, might not be welcomed back next year.
I see a lot of bowlers with various physical challenges (including knee braces, and all kinds of braces). None of them loft the ball to the arrows (except one that wears no braces at all and is in his mid 30s, and no one in our leauge particularly cares whether he lofts to he arrows or not). So I have my doubts as to whether your friend does this because of his knees or because its just the way he bowls.
Bottom line, your friend is not going to change his style and until the center says he cannot do X or Y, he shouldn't. Nothing in USBC rules cover how far you can or cannot loft the ball. So he's 100% covered in how he wants to bowl. Unless the center steps in.
Just make sure this is the bridge you both want to die on before you start the battle.