SEATTLE - People openly lit joints under the Space Needle and on Seattle's sidewalks - then blew the smoke at TV news cameras. To those looking to "get baked," the city's police department suggested pizza and a "Lord of the Rings" movie marathon.

What, exactly, is going on in Washington state?

Marijuana possession became legal under state law Thursday, the day a measure approved by voters to regulate marijuana like alcohol took effect. It prompted midnight celebrations from pot activists who say the war on drugs has failed.

But as the dawn of legalization arrives, Washington and Colorado, where a similar law passed last month, now face some genuinely complicated dilemmas: How on Earth do you go about creating a functioning, legal weed market? How do you ensure adults the freedom to use pot responsibly, or not so responsibly, while keeping it away from teenagers?

And perhaps most pressingly, will the Justice Department just stand by while the states issue licenses to the growers, processors and sellers of a substance that, under federal law, remains very much illegal?

"We're building this from the ground all the way up," said Brian Smith, spokesman for the Washington Liquor Control Board, which is charged with regulating the drug. "The initiative didn't just wave a magic wand and make everybody here an expert on marijuana."

The measures approved Nov. 6 have two main facets. First, they OK the possession of up to an ounce of marijuana by adults over 21. That took effect Thursday in Washington, though it remains illegal - for now - to sell pot, so people have to keep getting it from the marijuana fairy.

In Colorado, where pot fans will also be able to grow their own plants, the law takes effect by Jan. 5.

The other part of the measures, the regulatory schemes, are trickier. Washington's Liquor Control Board, which has been regulating alcohol for 78 years, has a year to adopt rules for the fledgling pot industry: How many growers, processors and stores should there be in each county? Should there be limits on potency? How should the pot be inspected, packaged and labeled?

To help answer those questions, officials will turn to experts in the field - including police, public policy experts and some of the state's many purveyors of medical marijuana. Smith anticipates undercover monitoring operations to make sure the private, state-licensed stores aren't selling to minors.

With legalization, officials need to look at some of the measures that have been shown to reduce teen drinking, said Derek Franklin, president of the Washington Association for Substance Abuse and Violence Prevention. That includes public education about the risks of pot use and driving while stoned, emphasize patrols to look for stoned drivers, and encouraging cities to adopt laws that hold parents accountable if they host parties at which kids are provided marijuana.

"We're really going to need to get all hands on deck to sort through this," he said.

The marijuana will be taxed heavily, with revenues possibly reaching hundreds of millions of dollars a year for schools, health care, basic government services and substance abuse prevention.

Unless, of course, the Justice Department has something to say about it.

Few people question the states' ability to simply remove all penalties under their own laws for marijuana. The federal government would remain free to raid state-licensed growers or stores and prosecute those involved in federal court, just as they remain free to shut down medical marijuana dispensaries in states with medical marijuana laws.

Whether a state can regulate an illegal substance is another question. Many constitutional law scholars say the answer is no: Washington and Colorado's regulatory schemes obviously conflict with marijuana's prohibition in the federal Controlled Substances Act, and when state and federal laws conflict, the feds win out, they say.

So the Justice Department could likely sue to block the regulatory schemes. But will it? What's better, from the administration's perspective - an ounce of weed legalized with regulation or an ounce of weed legalized with no oversight?

The department has given no hints about its plans.

While pot fans wait for an answer, they are partying. Though Washington's law prohibits smoking in public, about 200 gathered under the Space Needle for a New Year's Eve-style countdown to midnight.

A few dozen gathered on a sidewalk outside the north Seattle headquarters of the annual Hempfest celebration and did the same, offering joints to reporters.

"I feel like a kid in a candy store!" shouted Hempfest volunteer Darby Hageman. "It's all becoming real now!"

The Seattle Police Department emailed its 1,300 officers, telling them not to write any citations for smoking pot in public until further notice. A voter initiative passed in 2003 made marijuana enforcement the department's lowest priority, and for years officers have looked the other way while thousands light up at Hempfest.

Officers will nevertheless advise people not to smoke in public, police spokesman Jonah Spangenthal-Lee wrote on the SPD Blotter. "The police department believes that, under state law, you may responsibly get baked, order some pizzas and enjoy a 'Lord of the Rings' marathon in the privacy of your own home, if you want to."

He offered a catchy new directive referring to the film "The Big Lebowski," popular with many marijuana fans: "The Dude abides, and says 'take it inside!'"