Stealing signs is not listed as prohibited anywhere in NCAAs rules. What Michigan is being accused of is traveling to opponent games in an attempt to steal their signs, which was legal until 1994. When it was prohibited apparently it was done so as a cost saving measure, which many Michigan fans are pointing out as why this is ridiculous. But I read cost saving as more of a "prevent big programs from getting a competitive edge over small programs who can't afford to send their staff to opponent games". Who knows, part of me thinks it seems pretty petty, the non-biased part of me sees a pattern of Harbaugh lightly sticking his toe over the line on multiple issues during his time at Michigan and waiting to see if he gets caught so this is probably another example.
The one funny thing I've seen pointed out is that they almost certainly wouldn't have sent someone to attend a TCU game since most people thought it was unlikely that UM would be paired with TCU, and in that game they gave up 51 points (37 allowed by the defense). But that would ignore other games like the Big Ten championship games against Iowa and Purdue, neither of whom they played that season and neither of whom had locked up a spot until after Michigan locked up theirs. Sure its Big Ten West fodder for them but they destroyed both of them pretty badly.