Only if you get caught.

Why would that be illegal? How is it different from trading BTC for anything else??

Because it's illegal to sell frequent flyer miles for any kind of currency. So, you're right, it's not different if you use BTC or if you use dollars.

Would somebody sell frequent flyer miles by selling the account they are tied to so the other person could use them or can you transfer them from person to person?

Financial regulations are purposefully ambiguous by design as admitted in many Bitcoin hearings. This allow flexibility for judges , prosecutors, and regulators to use their judgment or biases into what they constitute is legal or illegal.

There is no yes or no answer to find here especially since certain sectors of US law classify Bitcoin as a currency and others as an asset.

I wish it was that simple but there are stacks of overlapping, contradictory, and ambiguous regulations that could be used to prosecute you if you upset the wrong people.

I was just following a ridiculous court case where someone collecting money for charity was convicted under a local panhandling ordinance.

He has lost his case and now has large fines and jail time exceeding the maximum penalty by their own statutes and they wouldn't even allow him to provide the letter from the non-profit submitted as evidence in the trial.

These incidents happen all the time and you likely are committing multiple felonies every day without even knowing it by the way some of these laws are worded and enforced.

Collecting money for charity isn't panhandling ,  but I'm glad you are starting to get the idea how ambiguity and opinion play into the legality of the situation.

Facts don't matter by themselves much but can help or hurt your case. This is because the court system routinely chooses to ignore or block certain facts from being permitted like in the example I gave. They refused his rights to provide evidence showing he was collecting for the charity and refused his ability to use any arguments towards the constitutionality of the "crime" of collecting for a charity.

There was no accidents made by this court either... I can almost guaranteed you will be arrested for collecting for charities which don't fit their political agenda, while other charity workers like the salvation army are free to ask for donations.

I can't remember the details, and it depends of the airline, but I know it's perfectly possible to transfer your miles legally. Airlines are from equal on that matter.