Am I correct that this is what they solely base the taint on when it comes to coins surrounding dark net marketplaces?
No one is going to be able to say for sure unless they work for one of these blockchain analysis companies and are familiar with their various algorithms, analyses, and outcomes. What we do know is that some exchanges and blockchain analysis companies label coins as "tainted" for completely trivial reasons. Some say that any coins which have been mixed are tainted. Some say that any coins which have been coinjoined are tainted. Some say that any coins which have come from casinos, or sportsbooks, or darknet markets, etc., are tainted.
As you say, if you trace any bitcoin back far enough, then chances are it has been involved in some kind of activity which would be deemed as "tainted". But again, we don't know how far back these companies look. What if the bitcoin came from a darknet market 10 transactions ago? What about 100? What about 1000? Is it still tainted? What if it has been combined with some "clean" bitcoin in a transaction? Are all the outputs of that transaction now tainted? Or perhaps they are only 50% tainted? What if those outputs and combined again? These analyses are completely arbitrary, and in many cases, completely meaningless.
Often the best answer to a question like this is a practical one - which services or exchange are you trying to use which is passing arbitrary judgement about the "taintedness" of your bitcoin? Can you transition to a different one?
I think this is a well written reply so thank you. The probably I see from reading forums is that exchanges have a pattern of locking accounts at time of withdrawal and not being transparent about concerns at time of deposit.
I am no legal expert but for the sake of argument even if your bitcoin was directly from illegal activity these exchanges are not law enforcement. What legal authority would they have to ever hold someone's funds demanding information as to the source if they are insinuating coins are tainted? AML requires them to collect information but I see no where that authorizes legal authority to withhold funds you deposited until they come to some arbitrary level of satisfaction as to the source of said funds. As long as they have your identity information then pass it to law enforcement if you think something is criminal but process the withdrawal no the less.
Even if someone was committing tax evasion then they should report it but where does there legal authority arise from to act on these analytics firm taint tools to deny withdrawals..