Continuity mistake: During the chase scene where they attach the "engine killer" remote to the Dodge M4S (aka Wraith's vehicle), 2 Chevy Malibu Cop cars are barreling up the road towards the racers. Once the cops pass the starting line, the cars are now Dodge cop cars. (00:44:25)
Continuity mistake: When the Wraith first shows at the drive in, Packard's car hood shows signs of the gunshots that the Wraith blows in his car, but that doesn't happen until a few minutes later in the film. (00:28:00)
Answer: After the first race where Augie is killed the sheriff says "I've been waiting to catch you guys in the act. Been waiting and watching." So we can assume there were complaints made however the sheriff may not have had enough evidence to shut them down completly. As far as the state police, I'm not sure. May be a jurisdictional thing.
Mister Ed
I agree with this answer. Packard was very careful not to flagrantly break any laws. He even said this to Loomis in the "paper doll" scene later in the movie - Packard says that the gang hadn't done anything except "bust the speed limit."