Many colleges in the US have done this already and candidates who choose not to submit test scores are admitted on the basis of high school grades, perceived personal attributes, recommendations, essays, extra-curricular activities and/or membership of a valued group. Most of these, but not all, appear to be small liberal arts colleges. Chicago is the first major US research university to do so but is unlikely to be the last.
A common justification is that dropping the test requirement allows universities to recruit students from disadvantaged or underrepresented groups who may not do well on standardised tests. Perhaps it does but there is also a less altruistic reason. Going test-optional might help Chicago to maintain or even improve its position in the US News rankings while allowing the overall academic ability of its students to slide.
If the students who choose not to submit test scores are scoring below average then the overall test scores will rise which will improve Chicago's standing in the rankings. Apparently it is US News policy to avoid penalising institutions as long as 75% of the incoming class submit their scores. Also, if they get more applicants then the admission rate goes down and the university appears more selective. All in all, it looks like a win-win situation. But as more students are selected because they can produce a two minute video, are members of a protected group, or voice support for current orthodoxies, overall academic quality will gradually drift downwards.
There are signs that higher education in the West is moving away from the objective standardised testing of academic ability. It is likely that those admitted because they are likeable or passionate, show leadership qualities or bring new perspectives to the classroom will find the cold realities of advanced physics or philosophy frustrating and will demand that standards be adjusted to accommodate them.
Meanwhile the long slow convergence of America and China will continue. China is now level with the US for many measures of research output and parity in quality will probably come soon. If American schools abandon the rigorous selection of students, teachers and researchers they are likely to fall behind.