Nationalist and unionist politicians have united in opposing any move to legalise the Red Hand Commando - and have urged the loyalist paramilitary group to disband.
Home Secretary Amber Rudd has 90 days to rule on the group's application to be removed from a list of proscribed organisations.
Sinn Fein said doing so would be "ludicrous and abhorrent" to victims, while the Ulster Unionists, TUV and Alliance demanded that all paramilitary groups disband.
The DUP said it was up to the Government to assess the group's application, but the impact on victims must be considered.
The Red Hand Commando, which formally ended its campaign 10 years ago, handed in a 100-page document setting out its request to the Home Office in London last week and restated its "true and abject remorse to all innocent victims of the conflict".
It is supported by umbrella organisation the Loyalist Communities Council, which sees the application as a test case to "lay out a road map for the transformation of loyalist groups".
If the Red Hand Commando is successful, the UVF and UDA are expected to follow suit.
Sinn Fein MLA Gerry Kelly said: "The idea that the Red Hand Commando could in any way become a community organisation is ludicrous. I am sure victims would find that abhorrent."
The north Belfast politician said the group was an offshoot of the UVF, which was still involved in criminal activity including extortion, drug dealing and murder.
"That activity is actually on the increase and just this week the Red Hand Commando's partners in the UVF were blamed for a gun attack which targeted a bedroom with three young children in it," he added.
Mr Kelly said while ex-paramilitaries could be active in community groups, all paramilitary organisations should disband. DUP leader Arlene Foster said her party would "work with those who wish to move away from paramilitary activity and build a better Northern Ireland", but there was "no place for paramilitary organisations" in society.
"It will be for the Government to make an assessment of this group's application to be de-proscribed, but we must always be mindful of how such initiatives impact upon victims who have suffered at the hands of terrorists in Northern Ireland," she added.
A UUP spokesman said: "In the year 2017, there is absolutely no reason for paramilitary organisations to exist in any shape or form, proscribed or otherwise.
"But because individuals have a past doesn't mean they can't have a future. We will work with those who have moved away from paramilitarism and criminality."
The PUP said it understood how legalising the Red Hand Commando could be "a difficult step for some". However, it said the organisation had shown "true and abject remorse" for its actions and its members had become involved in peace building in their community.
TUV leader Jim Allister said the Red Hand Commando had denied people's right to life.
"If, as they claim, they really have changed, why would they want to be remain associated with a terrorist organisation which murdered people?" he asked.
"Disbandment, not legalisation, is the response of genuine remorse. We have the disgusting situation today in Northern Ireland where paramilitaries have been encouraged to morph into State-funded charities."
Mr Allister said if the proposal wasn't firmly rejected, other paramilitary groups would ask for the same.
Alliance MLA and former Justice Minister David Ford said the key issue was why the Red Hand Commando was asking to be de-proscribed, rather than disbanding of its own accord.
"Alliance has consistently called for a proper strategy to tackle paramilitaries, based on breaking down the structures that exist, not facilitating ongoing community control and organised crime under a veneer of respectability," he said.
Kenny Donaldson of Innocent Victims United opposed the Home Secretary ending the group's proscription.
He said: "We do not believe that the terror names IRA, UVF/RHC, INLA, UDA etc should ever become legalised, they must be remembered in history for what they were - organisations of oppression with ideologies which encouraged and indeed demanded one neighbour to murder another."