If you live in the USA its legal,
However, some people buy Bitcoins to launder illegally made cash.
I have noticed this and I have made sure to avoid this anytime I am thinking it is something fishy. The people who use BTC for this, in my opinion, actually are ruining the BTC credibility. When the government auctions off so much of BTC, it shows the general public this is not a currency and leads others to believe that BTC is the choice of illegal activity.
BurtW case shows that if you are living in the wrong area of the US selling bitcoin can be illegal. You will be in trouble with police, FBI, homeland security and God knows what else.
To be sure about your bitcoin sell/buy transactions being completely legal to use registered bitcoin exchange. Yes, that is painful as your IDs can be probably leaked to IRS in the future, but at least you won't end up in jail.