The state sees $$$ in terms of licensing and registration fees (in the interests of public health, of course) as well as income taxes they currently aren’t getting a cut of.
Generally they are getting income taxes from prostitutes who make high amounts of money pay taxes under other income in order to avoid being investigated for not having a visible means of support financing their lifestyle.
The States have basically taken over all the rackets previously run by organized crime; gambling, drugs, and prostitution.