And also the collapse of the government. They're totally vested in keeping drugs illegal. It's a profit center for them

No it isn't. It's a huge nightmare and this is why even current and former Mexican Presidents are calling for legalization - despite pressure from the U.S. against it.

https://qz.com/874497/mexico-is-moving-toward-medical-mariju... https://www.theguardian.com/world/2015/nov/18/former-preside...

It would likely end violence, but why can't these highly-organized, powerful cartels simply pivot into dealing wholesale, once legal?

Well, then they essentially become above board legitimate businesses competing on their ability to provide a service in the market.

Legalization implies regulation of some sort (e.g. like alcohol). You could also have a government-run monopoly.

The point is to remove the billions of dollars in black-market profits which give rise to criminal organizations who cannot depend on the law to resolve their disputes and must therefore "make their own law".

They'd be competing with alcohol and pharmaceutical companies, who could easily arrange supply and wholesale distribution, and have the advantage navigating political and regulatory issues in a legal way. The paramilitary aspect of cartels would become obsolete, or perhaps be focused elsewhere? Like many people in the black market for cannabis in the US, ranging from growers to judges, they probably see legalization as a disruption that is not welcome since the current system is working well for them.