Technically it's not illegal until someone mounts a buttstock on that reciever in combination with the 7.5 inch barrel. If they build a new lower for that Rifle upper and buttstock no laws are broken. However the implication of that advertised package is illegal so it's actually a pretty damned poor idea.

However that whole "a pistol lower will always be a pistol lower" is one of the stupidest rules I have ever seen. How will the ATF or any other law enforcement agency ever know if you have put that combination together as a rifle if you did it in your own home and never ever told anyone what you did. End result is a law that is only enforceable if Law enforcement personnel actually see you do this.

I'll also note that IMO the AR Pistol is just plain DUMB. As a firearm is ballistically compromised by the short barrel and rather difficult to shoot as a pistol. If have a need for close quarters SD weapon my choice would be a Mossberg Shockwave in 12 gage. Because as a competitive shotgun shooter I know full well just how devastating a 12 gage is at close range.