The current design is as follows:

• All items that are found while in CoF are untradable and it will be noted as such on the item's tooltip.
• All items that are found as a result of a CoF perk (passive effect from Rank rewards, or Prophecy) will be CoF-tagged (and of course untradable)

The reason for this difference is that if those non-CoF tagged items were tradable, it would create a very bad 'burden of optimal play' scenario where players would feel pressured to either switch Factions occasionally or, in the more likely case, have a second character level as Merchant's Guild (MG) just to be able to sell those high value items you might find as CoF that aren't tagged CoF.

And we want some items to stay as non-CoF tagged, so that switching from CoF to MG would be less painful, and for cases where MG and CoF players play together, as in that case all items found by the MG player would be usable to the CoF, while some items found by the CoF would be usable to the MG player (instead of all being unusable).

So by having untradable but not CoF-tagged items solves the 'burden of optimal play' problem, keeps potential Faction switching more feasible, and lets MG and CoF players co-op together with one less constraint.