I'm a Toronto native. These are the forces driving this decision:
1. Provincial government is cash poor. The LCBO is a huge source of cash, what government would give up another source? This isn't taxes, this is profit. "Isn't this just another tax?" One might ask, but no it's not. The reason is that Ontario has fewer alcohol distribution centres than a free market would provide. Most people just do a bigger alcohol run and drive / walk / drive further than their American counterparts. There's queuing occasionally, but usually only before long weekends or holidays.
2. The current dispensaries are run by criminals. The optics of giving a windfall to law breakers aren't great. The police keep shutting them down, and they keep popping up. I'm not bashing them, I think cannabis should have been legalized a long time ago and I think it's unconscionable that we have Canadians addicted to heroin because they were given opioids instead of pot, because pot requires a huge hassle to get approved, and I think dispensaries alleviate that stress, but some operations are huuuuge and most certainly are funnelling money into real criminal organizations.
3. The union at the LCBO is huge and powerful. The jobs, even seasonal ones, pay well and Ontarians aren't outraged because the staff is generally competent and friendly and the stores are clean.
4. Controls over potency are a real problem in the current dispensaries and because of the sketchiness of the current people involved and their distribution networks, the government would have to get involved auditing anyway.
I hope that they keep the stores open every day of the week. Many Canadians use pot outside the medical system, but for medical reasons and fast access will mean the black market will finally collapse. I also hope there will be a system for legitimizing certain strains that gain popularity in the US, like the LCBO does for wine.