Again, even if you registered your bike somewhere, how do you prove it was actually stolen and not legally sold to the current owner?

This is why possession is 9/10th of the law. (That's not really a law, by the way. It just means the burden of proof is on the person claiming the property is stolen)

When the cops show up to sort things out you can show them all the bike registrations you want showing you used to own the bike. But that is not in dispute. It's relatively easy to prove you USED to own the bike but no one cares if you USED to own it. What matters is who legally owns it NOW

As for the new owner, if you are in possession of stolen goods you're out of luck. If the rightful owner can prove he is the rightful owner the current owner is screwed, even if they had no idea the bike was stolen. Now, if you are unknowingly in possession of stolen goods and there is no proof that you were aware the bike was stolen, then you don't get in any trouble. But you don't get your money back.

That's why it's important when you bike something expensive off Craigslist to protect yourself.

First off, make the transaction at the seller's house. Don't meet in the abandoned quarry 20 miles outside of town. Someone selling stolen goods won't be selling them out of his house since that is the first place you will send the cops if you find out you bought stolen goods. If you aren't comfortable going to the seller's house, you probably shouldn't be meeting up with that person anywhere.

Second, get a receipt. Make the seller sign it. (If you're buying a $100 old beater....skip this part. If you are buying a $2000 carbon bike, write up a receipt). If the bike does turn out to be stolen later you can prove that you didn't steal it, and can give the cops evidence about who did, and can sue to recoup your money. (Good luck with that one...but without the receipt you have no chance)

Ultimately though if you buy a used bike that turns out to be stolen and the rightful owner comes to claim it....you are out the money.

It's one of the advantages of buying from a legitimate store. It tends to cost a little more but if the bike does turn out to be stolen you have a printed receipt from a business who will really have no choice but to give you a full refund. It would be cheaper for them to eat the loss than to get a reputation of selling stolen bikes. (Plus they will give you a tune up and stuff too)

Sometimes you just have to use your instincts. If it's a Craiglist deal for a brand new carbon fiber bike for $300....alarm bells should be going off. I mean maybe it's just someone who had no idea what it's worth. But it's probably stolen. If the Craiglist ad is too elaborate with a back story of "I am selling this cheap because it's my ex boyfriend's and he left me pregnant and I just need money fast" it's a stolen bike. If everything seems legit until you get to the seller's house and the back yard has 400 bikes in various sizes and styles(meaning they aren't all his) just keep driving.

But if the bike is offered at a reasonable price and you talk to the seller on the phone and meet him at his house and nothing is making your spidey sense tingle, take the risk. But get a receipt.

The human brain is REMARKABLE at detecting someone lying to you. It has amazing accuracy in giving you warning that something about an interaction doesn't smell right. We all develop that skill over years of interacting with other humans. Where the system is flawed is that we often ignore the voice in our heads saying "RUN! THIS DOESN'T SEEM RIGHT!" because we want to convince ourselves that it's a legit good deal. The brain told you it's wrong but we ignore it. Don't ignore it. Trust your instincts. They are probably right.