Its defective per Apple. Also, this specific defect has been known to only affect the GPS models and not LTE.
This article explains everything and even shows a picture of exactly what your Apple Watch is exhibiting.
Direct from the article:
“Apple has determined that some Apple Watch Series 3 models have an issue causing "edge stripes" to appear on the display after time. In an internal memo distributed to Genius Bars and Apple Authorized Service Providers, Apple said the issue is to be treated like any other Apple Watch repair. Since the issue appears to be a manufacturing defect, the repair should be free under Apple's standard one-year limited warranty policy. “