While it's not illegal, it does violate the terms and conditions of most loyalty programs. On the other hand, you often see upgrades being sold on ebay. So the question then is, how would the airline know?

This is what it says on M&S pages. I remembered wrong in my previous post, you can give away a Gold card to anyone with 40k miles. But the upgrade vouchers you cannot give away to others.

"Please keep in mind that the upgrades cannot be used by other persons except the Elite Plus card holder. Upgraded flights will earn paid Economy Class miles.
The validity of the unused free upgrades will not be extended for the next membership year.

Complimentary Elite Card for your beloved one
Elite Plus members are able to nominate 3 individuals of their choice to Elite status against 40.000 bonus Miles for each people. "

If you have a friend who would like status and they have very generously shared with you a gift card worth $400 or some nice holiday gifts a certain amount. It would be perfectly reasonable for you to generously gift them elite status for a year. IT's just what friends do.