Yes, they are "legal". Very little in awards programs can be done that would violate the law and have the police come after you.

But I suspect that this would violate the terms and conditions of the programs. You won't get arrested, but you could forfeit all of you accumulated points.

How can they do it? It's not illegal or against the program T&C to be an intermediary to such a transaction. You lose the points, LoyaltyMatch has no liability/damage.

Note the weasel words buried deep in the fine print - "In making a reward purchase or trade, you warrant and covenant to LoyaltyMatch that: (a) you are legally able to trade the rewards through the LoyaltyMatch Site, (b) you have read and agreed to the terms and conditions of for the loyalty or rewards program from which you are listing rewards to buy or trade on the LoyaltyMatch Site, and, (c) your offer to buy or trade will not violate the terms and conditions of your respective Loyalty Program as they pertain to you. "

I.e. - you are stating/committing that you have verified the T&Cs of your program and are allowed to do this.

So when you get smacked, they just say "but you stated to us that it was OK and we accepted your word - your mistake, not ours"