Many Pokémon transferred from Pokémon HOME can't be used competitively
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After Pokémon HOME released last night, players immediately went to transfer creatures into Pokémon Sword and Shield from previous games and use them competitively. They quickly found out that they were not able to do this.

The official Play Pokémon Video Game Rules specify that only the first 397 members of the Galar Regional Dex are legal in competitive play. In addition to this, legal Pokémon with moves not available in Pokémon Sword and Shield cannot be used.

These rules apply to both the singles and doubles ranked battles in Pokémon Sword and Shield and the current VGC 2020 tournament rules.

Will these rules change in the future?

There is no word as of right now on whether these Pokémon will become legal for use in the future. It seems unlikely that the official rules will change anytime soon, but they may receive an update when the new DLC comes out.

The upcoming DLC will introduce a plethora of new Pokémon into the games, and the competitive rules will likely change to accommodate this. This may also make Pokémon from Pokémon HOME legal in competitive play.

As for legal Pokémon moves, that also depends on what the DLC adds to the game. Currently, certain moves do not exist in Pokémon Sword and Shield. If the DLC adds more moves to the game or changes which Pokémon can learn what, this could also see updates in the future.

Pokémon that are legal for use

While Pokémon outside of the Galar national dex are illegal, Pokémon HOME‘s release did add some new Hidden abilities to the game. And these are legal to use.

Most of these Hidden Abilities will not have a big impact on the current metagame, but a few are worth mentioning. Clefairy with the Friend Guard ability, in particular, should perform well in competitive battles.

Remember that attempting to use an illegal Pokémon or move at a tournament will result in disqualification. Be careful when making a team now, especially when dealing with Pokémon acquired from trades.