The legislators can make whatever they want illegal, but that doesn't make it necessarily enforceable.

Thing about mixing is, since any person (or autonomous process) can generate wallets and send BTC to those on the fly, how do you prove that you used a tumbling service and not that you gave coins to a guy who gave coins to a guy who split them up into separate wallets who each gave coins to a guy, etc etc etc.

As Bitcoin picks up steam, this problem only gets harder. Remember that the block chain only consists of hashes and signatures. Proving who owns those is a much more difficult process.

It's trivial to make it enforcable. Whenever BTC leave the mixed wallet into a regulated area, bust the person doing so for violating money laundering laws if they used mixing. If they didn't use mixing, but received mixed funds you can probably impound some fraction of their funds to.

Either way you now have enough evidence to raid their PC to check for further laundered funds and generally make their lives miserable. When people complain just find a fraction of a BTC that was used at some point in the past to fund the social demon of the day (child porn, terrorism, drugs, sex trafficking, etc.) to justify it.

How do you prove that circulated coins are the product of a mixing operation and not just normal transactional flow?

Someone mines coins and gives coins to a guy who gives coins to a guy who gives coins to a guy (repeat n times) who gives coins to you, and every link in the chain is following best practices by generating new wallets for each transaction, how would the adversary prove that you're doing something untoward (and since we're discussing law at this point, beyond a reasonable doubt?)

This is no different than laundering cash, except that there is more information about the actual transaction flow.

You didn't really answer my question. Assume you're in some position of authority. With the knowledge that bitcoin wallets can be generated out of thin air, how do you prove that a given transaction chain was the product of a mixing operation and not the product of normal transactional flow?

Physical wallets can also be created out of thin air. I'm not a forensic accountant, so detailing precisely how is not in my area of expertise, but we successfully prosecute people for laundering cash, and bitcoin only has more information, more accessible than cash. I am not saying it can be done with just the block chain, but the block chain is a piece of evidence that is far more easily accessible than a criminal enterprises' individual ledgers.

There is a much lower burden for confiscating currency than beyond a reasonable doubt.

It is much easier to enforce than money laundering with cash. It still takes investigation beyond staring at the block chain, quite obviously, but that isn't anything new. Consider some simple undercover work. If I send you coins to be mixed, we can track what happens to those coins. Now we know every address that participated in a mixer, and can tie the addresses to people when coins are spent (with, fully acknowledged, a certain amount of elbow grease).

High adversarial costs + increased uncertainty = ineffective regulation.

But it's not like that won't stop them from trying. Probably via a bunch of high-profile "busts" to keep the law enforcement agencies financed.