The states already wastes billions (far more then what they would stand to gain if they legalize it, or even reduce the punishment for crimes relating to it) enforcing a drug law that doesn't work.
Even if they lessen the penalties for possession of small ammounts can save millions, proof of which can be seen up here in canada where you if have less then an ounce of pot and only get a fine and the substance confiscated.
Personally, I think it should be legalized and heavily regulated. Why do I think this? Because compared to other drugs that are legal, like Booze and smokes, Pot is virtually harmless in comparison.