Correctly known as melithaea ochracea, sponge coral is a coral not a sponge. Found primarily in the South China Sea, it's lightweight but also quite soft so must be handled carefully. It can be legally traded because it's not endangered.
This coral is stabilised because its natural tree-like structure has tiny holes created by polyps. The process involves filling the holes with a resin or other substance to prevent erosion or crumbling. It's widely used on many rocks and minerals so they can be used for other purposes.