If it really becomes legally regulated then it could be chaos. Because then government who is responsible for its conversion to legal currency would also regulate it in their terms and condition and then you can say that it is fall of decentralised system of bitcoin.
If there would be some chaos, I don't think that would be the reason. Isn't most exchanges already regulated?
Also, people could always use p2p trading, which seems to be the most efficient and decentralized way of trading bitcoins.