Create a legal market; a legitimately competitive market, without getting greedy on the taxes, and the black market will be a blip on the radar.
Yes, there will always be bootleggers, as long as there is heavy taxation. But compared to bootleggers during prohibition it's a dead industry that "most" consumers don't take part in. They are supplied by legitimate companies through the theft of their products. Over 90% of the population do not use this method to obtain their goods. Get real.
In the early 90's, cigarettes where around $10/pack, 70/carton and the RCMP couldn't keep up with the boats and trucks smuggling non taxed cigarettes across the St. Lawrence from the U.S. The money they were spending trying to curtail this problem was astronomical and creating big problems. A good customer of mine at the time was working at a convenience store in Scarborough, graveyard shift, trying to earn money to support his family. Two bad dudes entered the store while Ross was mopping up the floor. One of them directly approached Ross and shot him in the head. The over loaded cartons into the garbage bags they brought. They did not steal anything else. Not even the money in the register. Only the smokes!!! They left a guys kids orphans all because of over taxation. For these guys, it was more profitable to sell stolen, overpriced/taxed cigarettes than selling weed or coke, and the punishment was practically nothing relative to the others. It was a win, win for the black market. So, one day, overnight, we woke up to the news that the government was removing most taxes from cigarettes and the price dropped in one day to around $2.50/pack or 16 bucks a carton, for brand names. There weren't really any cheapy smokes then. They were all the same price. All of a sudden there were a whole bunch a bad guys with a whole bunch of stolen supply that they couldn't sell.