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The level 50 to 100 applies to WFC, not local wifi. And in the cup modes there are too many restrictions so you we're forced to use No Restrictions which takes pokemon at their current level.

Traded pokemon aren't always the best for battling, too many factors are needed which make the Diablo reference moot. Pokemon have natures, IVs, EVs, etc that all determine its strength. When you create different teams, you have that many more to get to level 100, hours and hours of work for the handful of battles you do. All rare candies do, in my opinion, are level the playing field for local, no restriction play. I hardly see it as cheating.