The gun show loophole
Here is the definition of the “Gun Show Loophole” on Wikipedia:
Gun show loophole, gun law loophole, Brady law loophole (or Brady bill loophole), private sale loophole, and private sale exemption are terms in the United States referring to sales of firearms by private sellers, including those done at gun shows, dubbed the “secondary market”. The term refers to the concept that a loophole in federal law exists, under which “any person may sell a firearm to an unlicensed resident of the state where they reside, as long as they do not know or have reasonable cause to believe the person is prohibited from receiving or possessing firearms”.
This PolitiFact article covers some of the difficulties involved with the “loophole” term and why the exemption exists:
Gary Kleck, a criminologist at Florida State University, said the term “gun show loophole” is misleading if it implies that the law didn’t intend to exempt some sellers. “The term ‘loophole’ suggests that it was a minor, unintended flaw in the design of the law, something inadvertently overlooked by lawmakers, when it was actually the very intentional result of a carefully worked-out political compromise between those who wanted background checks on all gun acquisitions and those who did not want any at all,” he said.
…for decades, dealers have been required to obtain a federal firearms license. But those who sell firearms from time to time — such as to a relative — aren’t required to obtain such a license.
Reason for the loophole
As an individual (i.e., not a gun dealer), being allowed to sell a gun to a friend or relative without a license is the justification for creating the license requirement exemption. One of the issues becomes how many guns an individual needs to sell before becoming a “dealer”; there’s apparently no definition of this number. Allowing non-dealers to sell guns means unlicensed gun “dealers” can sell at gun shows and other related events.