We now know that the Commission had (at least officially) banned drug dealing and that anyone caught would be whacked. The Godfather seems to do the opposite where the Commission would permit the sale of drugs, but that it would be controlled. Was the real Commission's policy on drugs known in the movie and novel were made? The drugs were still a good catalyst for the plot though so I'm not necessarily complaining that they made a goof by not following the real-life policy.

The real American Mafia did exactly the same as depicted in The Godfather. I'm not sure how you know the real life Commission officially banned drugs. The real policy always was "don't get caught". But until the 1990s the American Mafia controlled the distribution of drugs in the country.

Exactly.
In another example of the American Mafia's hypocrisy on drugs: The Bonannos lost their Commission seat because of rampant, uncontrolled drug-dealing during their period of sketchy leadership. Carmine Galante established a big heroin pipeline to Sicily, and brought in "zips" to run it. The Commission sanctioned his assassination because he refused to let others share the drugs pipeline.

True Turnbull, looking back to the meeting at the Grande Hotel in Sicily in 57 with Bonanno, Galante and crew, and the Mafia folk from Sicily, they set the standard for the drug trade up to the pizza connection, use imported Sicillian "Zips" to sell the drugs brought from Europe to Cananda where Galante had established an outpost years prior...This way they could say they did not deal drugs as the dealing was left to the others....of course that blew up on them as Galante and others were jailed for drug dealing....

The drug policy held a dpuble standard. Ther was a no drugs policy but if the boss like you and you were careful and made money he would turn the other way. Castellano did this to guys he liked however guys he didn't like like gotti ruggiero would be viable to get punished