For a governing body for tax revenue, commercialization and quality control, legalization is logical. Manage it in a similar fashion to alcohol.
Hire current drug dealers as state agents and local drug enforcement can be their managers.
It’s how I ran my Minecraft server long long ago. I’d hire griefers / trolls / troublemakers as staff and gave them responsibility.
With only one exception, everybody else did a fine job.
Simple. They just wanted to be noticed and also have power. So, I noticed them and gave them positions of power.