2) Most people don't think alcohol is bad enough to be illegal
3) Therefore logically those same people should agree that X shouldn't be punishable with criminal sanctions, as its use is no worse than things we already tolerate.
I.E. The argument presupposes that alcohol should be legal because most people think it should be. This is often used as a form of argument because it hangs off ideas people already have about the world and asks them to think logically/consistently. "If I can have a beer and not ruin my life, and objectively X is less bad than beer, maybe my opinions on X can adjust".
If you want to talk about alcohol being a pretty evil substance, I'm not going to argue.
I think this is something that's often lost in the debate too - you don't have to wholeheartedly approve of the use of something to want to see it legalised, just acknowledge that applying criminal charges to use is both unjust and deeply unhelpful to society and individuals.