Sharing Microsoft account with one friend is legal?

I understand what you're saying, but they all may happen "IF" your friend tries to abuse your trust, isn't it true?

It's all the matter of "not trusting a wrong person" rather than "your password being typed by yourself or by your friend".

Do you really want to take that risk? Personally, I wouldn't even give my password to my closest family but then I wouldn't want to risk my account. There's a reason why websites say "don't share your password". However, it's your account so if you want to open yourself up to your account potentially being misused and banned if you have a disagreement with your friend (or even if your friend simply thinks it would be funny to mess with your account), then that's your choice

Quite easily actually.

How?

Quite easily actually.

How?

But how they can ever know if I signed it to my friend's console myself or I gave him my info to do so?

So what about this?

https://support.xbox.com/en-US/help/hardware-network/console/my-home-xbox

If you want to share your games with your friend, sign in to their Xbox with your account and make that console your home Xbox. You can then remove your account from their Xbox. If your friend wants to share games with you, just do the reverse.