I've been able to take them into battles, but I make sure to encounter them at legit levels. Had to use the code for a 0 Speed Bloodmoon Ursaluna until Pkhex.Yeah atmospshere has a hard coded limit on codes lol you dont need that many.
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ANY pokemon spawned using encounter code are illegal for trade been that way since gen 6 (technically before that as well but there wasnt anti cheat)
Maybe the trade legality is different.