I'm sure it depends on the state, however I know for a fact they're illegal for street riding in Colorado. The cops were out here this past summer stopping the kids and escorting them home.
Think about it. The low profile on these things can get you killed easily. People can barely see full sized, multi-light, motorcycles with riders in green neon. There's no way they're going to see a pocket bike that, with rider, is probably no higher than 3'
Ride them on privie property or parks