This is a Custom Game based format with even fewer restrictions than BH in terms of legality.
Basically, you can use almost any 'mon (yes, even nonstandard Pokemon like CAP, Pokéstar Studio, and Missingno.)
Source #1 Post Rules
There's also a specific format for CAP, they are: SW/SH CAP, US/UM CAP and OR/AS CAP.
More information about CAP can be found here.
Thirdly, you can also use CAP Fakemons in custom games which have no restrictions like illegal moves, etc.
It is a challenge only format.
So the formats in which you can use CAPs are: Metronome battles, CAP and Custom battles.
Hope this helps!