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That's because Latios and Latias are not banned. Though they are still legendaries, they are not banned from the Battle Subway or the Battle Institude. Kyurem is still banned of course.

Source: Experience + Bulbapedia

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most legendaries that don't have a game featuring them or are an event poke are not banned, according to GameFreak...
yh... it realy annoys me when the old guy sends out legendaries. Im all like 0_o wut?
I hate the old guy on battle test...
i faced moltres heatran articuno and regigigas