Another glass facade among a string of restaurants, boutiques and offices in downtown Denver, there is little to distinguish the premises save the logo with a green cross. The reception is bright and neat and, at first glance, non-descript. Community event notices on the walls, orchids on a desk, a visitor on a sofa filling in a form.

Copies of National Geographic adorn the coffee table but the eye is drawn to colourful hardbacks: The Big Book of Buds: Marijuana Varieties from the World's Great Seed Breeders, volumes I to III. Beside them, another catchy title: The Cannabible.

Ean Seeb, the co-owner, offers a warm smile and handshake. "Other places put up Bob Marley posters and palm trees, but if you didn't know us, this could be a doctor's office."

We pass a hallway display case filled with elaborate bongs, waterpipes and glass pipes and enter a sanctum where two employees in black T-shirts serve customers weed from glass jars labelled with names such as Bio-Diesel, Ultimate '91 ChemDawg and DJ Short's Flo. They chat about Barack Obama's victory, check ID, swipe credit cards. It's all rather routine, even banal.

That is the point. Denver Relief, one of 500 medicinal marijuana dispensaries in Colorado, offers itself as testament to the fact you can openly, legally sell the drug without the sky falling or drugged zombies rampaging.

Which is just as well, because on the same day that Obama won another term, Colorado and Washington voted to legalise marijuana for recreational use, landmark decisions with profound implications for the decades-old, US-led "war on drugs".

Seeb, 37, an entrepreneur and civic activist, did not doubt its significance. "It's the beginning of the end for marijuana prohibition."

Quite a prediction, given successive presidents since Richard Nixon invested billions in criminalising the drug, jailing thousands for possession and pressuring the rest of the world to follow suit. The war on drugs seemed as engraved into the political landscape as Mount Rushmore.

Except now, at least in relation to marijuana, it seems to be crumbling. Seeb's confidence is shared in the US by a broad range of politicians, analysts, activists and former law enforcers who argue legalisation will generate tax revenue, hit drug cartel profits and curb the disproportionate jailing of Latinos and African Americans.

Leaders across Latin America, once obedient to White House drug policy, were already pushing for reform, led by Guatemala's president, Otto Pérez Molina. A senior aide to Mexico's president-elect, Enrique Peña Nieto, said Colorado and Washington had "changed the rules of the game" and this would be discussed with Obama and congressional leaders this month.

A study by the Mexican Competitiveness Institute said legalising cannabis in Colorado, Washington and Oregon could cut cartel profits by up to 30%.

"I really think this is the beginning of the end for marijuana prohibition, not only in the US, but across the world," said Sean McAllister, a former assistant attorney general in Colorado and member of Law Enforcement Against Prohibition. "We didn't just legalise it – we created a regulatory system."

Just as Colorado and other states pre-empted the federal government's abandonment of alcohol prohibition in 1933, the same may happen with pot, albeit slowly and unevenly.

Colorado's successful experiment with marijuana dispensaries – pot shops for people with medical certificates – emboldened voters to back amendment 64, which allows anyone aged over 21 to buy small amounts. It was the same dynamic in Washington.

"I hope we continue to show the US and the rest of the world what we can do as a regulated economic model," said Elliott Klug, 35, owner of the Pink House chain, which has six dispensaries in Colorado. "We are not here to promote a gangster model, we want to be good corporate citizens."

Klug's talk of branding, quality, market share and cost effectiveness was a world apart from movie stoners Cheech and Chong. Other dispensary owners struck the same tone. "It's a tough business, very competitive," said Toni Fox, owner of 3D, her 10,000 sq ft cultivation centre and store in Denver. "There are more dispensaries than [standalone] Starbucks."

Even after legalisation for medicinal purposes in 2000, marijuana was considered seedy in Colorado, not quite the hysteria of 1936 propaganda film Reefer Madness but still a far cry from hippie counter-culture tolerance.

"You'd walk into places that felt like your buddy's college basement. Very shady," recalled Kayvan Khalatbari, who co-owns Denver Relief.

But as the drug war escalated, and the front line shifted from Colombia to Mexico, where more than 60,000 have died since 2006, and with ethnic minorities packing US jails for minor drug offences, opinions shifted. Centrist thinktanks, such as the Brookings Institution, advocated legalising cannabis [see footnote]. More than a dozen US states did so for medicinal use.

"The medicinal marijuana industry in Colorado was a model for how legalisation can work – it works pretty darn well," said Betty Aldworth, of the Campaign to Regulate Marijuana Like Alcohol.

The state, home to liberal bastions such as Denver and Boulder, and with a tradition of growing fine weed, organised a 2006 ballot to legalise pot for recreational use. The shoestring Yes campaign lost 41% to 59% but gathered more support, money and organisation for another try this year.

The eclectic coalition included the American Civil Liberties Union, maverick Republicans, students and advocacy groups, such as the Drugs Policy Alliance, Just Say Now and Yes on 64. With $2m they hit airwaves casting the debate in terms of civil rights, jobs, fiscal gain (claiming $60m in savings and revenue) and state autonomy.

Senior Democrats and Republicans opposed the amendment but prioritised the presidential and congressional races. A Florida-based group, Save Our Society From Drugs, helped fund the No campaign, but it raised only about $700,000.

The energy of the Yes campaign was palpable a week before the vote. Driving across state, you saw pro-legalisation posters in towns and cities. Radio call-ins fizzed with passionate argument. "Our phone lines were just jammed," said David Sirota, a 630 KHOW host.

University students packed an auditorium in Boulder to hear Gary Johnson, a former New Mexico governor who ran for president on the Libertarian ticket, argue for legalisation. "Denver has the opportunity to change the world. Denver gets it," he said to cheers. Speaking to the Observer afterwards, Johnson said banning pot was madness, though he no longer smoked it himself. "I gave it up when I started becoming an athlete."

Soon after the polls closed last Tuesday, hundreds of campaigners packed Casselman's Bar in Denver to await the result. Giddy at the prospect of making history, they exploded when a giant screen gave them victory, 53% to 47%. "We won! We won!" A similar scene unfolded in Seattle, where the legalisation side won by 55% to 45%.

State officials, including senators, members of congress and mayors, said they would respect the decisions, but no one knows quite what will happen next. Under federal law, pot remains illegal. The Obama administration cracked down on dispensaries in California, where chaotic regulation has led to abuses. Activists say – hope – the feds will leave Colorado and Washington alone because their regulation is tighter and a second-term president should be looser.

Many of the campaigners who rented apartments in Denver are expecting to move on to California, Oregon and other battlegrounds, part of a strategy to focus on states before moving on to federal level.

Colorado's first recreational use shops are expected to open within a year but wags are already joking about Denver's nickname, Mile High City, and state anthem Rocky Mountain High.

Opponents see nothing funny about the prospect of Amsterdam-style "drug tourists". The continued ban on public consumption means no coffee shops but cannabis-friendly hotels and perhaps private clubs may sprout.

Johnson was not worrying. "Won't it be great when everyone gets on a plane to Denver at the weekend to chill out?"

• This article was amended on 12 November 2012. The original said that Centrist thinktanks, such as the Brookings Institution and Rand Corporation, advocated legalising cannabis. Rand Corporation has asked us to make clear that they did not take a stance on cannabis legalization. They do not take official positions on ballot initiatives or pending legislation. They conduct fact-based, nonpartisan analyses of policy issues. The reference to Rand has been removed from the text.