Depends on what you mean by "legal." It generally doesn't violate any laws, though a few posters here in the past have said it might run afoul of one in California about "using a ticket for carriage in violation of its terms and conditions" or some such. It does violate the terms and conditions that FF members agree to when they join a program.

Airlines are not unaware of eBay, nor are they unable to follow the clues to figure out who's selling the miles. Penalties include canceling the seller's account and telling the buyer, at the airport, that his/her ticket is worthless. (Wanna fly? Buy a new one at full fare.) And yes, it does happen - not every time, but often enough. A seller's reassurances that it won't happen to you will not prevent it.