So i don't understand how exactly the blockchain is recorded but this is how I think it works. You buy from circle then send it to your wallet of choice. Now.... Circle can see where you send your bitcoins from start to finish correct? So if I send it from Circle to an online casino.. then to a DNM wallet they can see the entire transaction? I see a lot of more bitcoin sellers stating they will report you if you use the bitcoin for illegal purchases.
They have to do this as a matter of legality. Blame the laws, not the companies. They can't be linked to or seen acting as supporters of illicit activities.
They can only tell where you are sending coins based on your patterns. Stick your coins in a tumbler or something and their systems won't flag you.