I'm reasonably sure that suitable mechanism design could be performed to make full legalization not only possible but much more desirable than the current scenario. It would require extensive reworking of legal and economic regulations and public policy. The first hurdle is legitimizing this type of research. From casual reading on the subject, I haven't seen any serious research like this in regards to the US, though admittedly I haven't looked very hard, but for obvious reasons the public coffers are not exactly overflowing to fund serious investigation into the matter.
