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.
When you sell Bitcoins to some guy in person there is no way of knowing where he got the money from. He could just bullshit if you ask.