We're in a similar situation with our 16 yr old. We didn't know he was using until I found his stash purely by accident in his bedroom (worst hiding place ever!). Anyway, we confiscated it and let him stew for a few days before confronting him. I say "confronting", but we had a grown up, sensible discussion. It turned out he'd been smoking occasionally at parties for a few months, and had then bought his own. Being pragmatic, liberal types, we decided that we would keep hold of it, and allow him to have small amounts to take to parties. Otherwise he'd probably have just bought some more, and gone "underground" with it and we may have lost control. It does mean that we are complicit in his occasional usage, but it seemed a better option than getting all heavy about it. I think it's helped that it's out in the open between us and he feels he can talk about it, but time will tell I suppose. One good thing is that, like his dad, he can't roll his own, so that restricts his usage!
On the wider question, I'm a big advocate of legalising, regulating and taxing. It's obviously not without its issues, but better than prohibition with all the problems that entails.