There is a great book by Ben Goldacre called 'Bad Science
' which addresses a lot of these issues.
Also lots of great stuff on the QuackWatch
I think the main reason for lack of regulation is ignorance. Many legislators have no more insight into scientific method than regular folks, for example not appreciating that anecdote (such as testimonials) has no evidential value since by its very nature such data is selective.
Many people have a longing to 'do something' - so if conventional science either says it can do nothing or tells them they have no definable illness, they look elsewhere.
The whole point of scientific method is it presents a rigourous remedy to just believing what you want to believe or presenting 'plausible' as 'factual'. The 'alternative' in 'Alternative Medicine' is essentially an alternative to that rigour...