When player two enters game via split-screen, the water graphics for player two are downgraded and are not able to be altered whatsoever. However, I've tried several different worlds and on certain worlds some water looks normal while other water looks downgraded for player two. I have tried changing every setting pertaining to in game graphics to fix this bug several times on every world with no positive results. I have also tried several different accounts but as long as they are joined via split-screen player two suffers from this issue. This bug has existed ever since the 1.9.0 update and only affects my Xbox One console.
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Thank you for your report!
However, this issue has been closed as a Duplicate of MCPE-39539.
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In the picture, notice the lack of transparency on the right as opposed to the water on the left.