This site claims it happened first in Canada to impress John Lennon. No idea about the veracity of this claim.
I remember a phone commercial from before the days of real phone flashlights (might even have been before smartphones), where a concert attendee realizes he doesn’t have a lighter on him, and waves his phone (with illuminated screen) instead. And of course, soon everyone else at the concert copies him.
Ryan George commentary on the practice:
I went to a Taylor Swift concert a few years ago. When we went in they gave us these wrist things that lit up. They would randomly change colors and such, but sometimes each section would be all the same color. Everyone went in through the same gates and it was after the tickets were taken so they must have been controlled somehow so each section looked the same.