I've heard of systems like this, and i'm pretty sure it's been around for a while, except it was for emergency use only (EMS, fire, etc). Only problem is that you'd have to put the system on a crapload of traffic lights for it to work effectively, or at the very least main roads. It wouldn't work everywhere, since most traffic lights in the country probably don't have an RF reciever for a system like this. Not to mention a really bored EE or something could make an RF device, assuming he/she/it knew the frequency, etc.
As for the legality, I doubt it would be illegal. I mean, think about the mechanics. Push a button, other light turns red, your light turns green. It would be just like a regular traffic cycle, although time between light change would be drasically shortened. You could potentially cause an accident with it, but even so, how would they catch you?