Could someone please explain me why trading on localbitcoins is considered legal but exchanges are illegal?
Exchanges are just automating the orders. I'm missing something obvious here?
Because there would have to be an infinite number of laws enacted to always make it illegal to trade P2P for newly created items. Say you create a new pair of glasses with awesome attachments, there goes a new law to ban those. You create something from pipecleaners and rubberbands, new law bans it and is illegal. See how pointless it is to keep creating these laws on a person by person basis?
Now when you get to a general sweeping law, like something that shuts down Silk Road or Sheep Market Place or whatever, those take out tons of people in one law or in one policy or whatever.
Government doesn't go after the individuals at the low levels, usually at the higher levels get taken down.