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Confederacies tend to declare the "usual" illegal goods to be illegal: slaves, narcotics, lethal weapons. Unlike all other Federal government types, Tobacco is legal in Federal Confederacies.
As far as Superpower affiliation, Confederacy is one of the allowed government types within the Federation. It is also found in the Alliance, though that shouldn't surprise as they have every government type represented except for Prison Colony. Confederacies are not permitted within the Empire (though Democracies are, to a very limited extent).