Criminal organizations would get severely weakened by this, but I could see it switching the focus of these organizations to other areas though, such as human trafficking and/or weapons. It could also lead to a burst of violence, as the drug trade becomes more contested, so any action needs a thorough response plan.
As for legalization, some drugs, such as Methamphetamine and Heroin, should not be available wholesale. Decriminalization would be the best step, in small quantities, to take the focus of the justice system off policing small crimes to tackling the gang related violence and the supply. After that, perhaps legalization by form of prescription to a diagnosed addict, to control the current users, whilst also educating the non-users in an honest and scientific manner may help to curb demand, squeezing suppliers.
Marijuana I believe should be controlled in a similar way to tobacco.
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