Define law and lawful transaction. For one example, law is a changing thing and rapidly changing one. What was pretty legal activity at Canada for pretty long time was changed at the hands of the government into illegal activity quite quickly and, what is mostly concerning to me, that law even has a retroactive nature - accounts can be frozen based on the activities prior to the date law enacted.

In my not so humble opinion, payment processors should be transaction-blind - they should process any transaction and all transactions.