Almost every call in football is a judgement call - Holding, PI, FG that goes right over the goal post, targeting, etc., etc.
Wave your hand above your head = valid fair catch, cant advance the ball
Wave your hand in any other manner than above your head = INvalid fair catch and still can't advance the ball.
Iowa did #2 above and then tried to advance the ball.
The only thing that would have made that play better is if someone blew up (and I mean absolutely annihilated him) the Iowa returner after he tried to run with the ball.