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The advantages are that you will limit such unsavory pursuits such as prostitution to sanctioned areas which are governed by actual law and procedure. Thus such activities can be regulated and the risk of exploitation lessened. Also, localities can benefit financially from the regulation of prostitution and other such "red-light" activities.
An obvious con would be that you would actually drive those who were once merely curious bystanders to actually begin engaging in unsavory activities, as the law seemingly sanctions their actions. This could lead to a subsequent crisis of conscience that could tear once sound and productive members of society to pieces, not to mention their families. Also, those who were once the victimizers (pimps, drug dealers, etc.) are now replaced by governmental entities that openly engage in the victimization of citizens that they once sought to protect. How can those in power claim they serve the public interest when they engage in activities that blatantly disenfranchise the poor and the weak?
Since you have posted this under "Law," I am assuming that you are asking about legal red light districts. If so, the arguments here are very similar to the arguments for and against legalized prostitution.
The major benefit of having legal red light districts is that the activities that go one there can be more effectively policed and abuses can be minimized. This could mean, for example, that there would be less in the way of coerced prostitution and/or abuse of prostitutes, whether by their bosses or by customers. Businesses in these districts could also be taxed, providing revenue for governments.
There are multiple potential drawbacks. One drawback is that many people find prostitution and other such activities to be morally reprehensible and do not want society to condone them. Another is that prostitution is, in the minds of many, inherently expolitative of women and should therefore not be allowed.
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