No, you generally cannot water whole milk down, and selling milk that has been watered down is illegal.
Here's why:
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Legality: Adding water to milk intended for sale is considered adulteration, which is illegal. This is because it changes the composition and nutritional value of the milk. [Clay Detlefsen, National Milk Producers Federation] indicates that such milk is considered an "adulterated product" and cannot be legally sold.
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Impact on Quality: Watering down milk affects its taste, texture, and nutritional content. This is because it dilutes the fats, proteins, vitamins, and minerals that naturally occur in whole milk.
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Potential for Detection: Milk processing facilities and regulatory agencies conduct tests to ensure milk meets specific standards for fat content, protein levels, and other components. Adding water can be detected through these tests.
In summary, while you can physically add water to whole milk, it's illegal to sell it that way and significantly reduces the quality of the milk.
