A strict distinction between law and gospel is offered as a prophylactic against works-righteousness. If it is admitted that law is gospel in any sense, all is lost.
But this view assumes the very same view of law that it contests. A proponent of works righteousness sees the law as demands that need to be kept, and the end of the law is simply its keeping. The proponent of law/gospel segregation has the same view of law.
Both detach law from its purpose, which, as Knight argues, is eschatological. Law exists to correct, instruct, lead to maturity. And to that extent, law is always intended as, and in practice often is, good news.
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