Dragons don't mindlessly burn down villages and terrorize humans like we think they do.
Even though numerous people died in the past encountering these mighty beasts, most attacks were not unprovoked... Dragons actively hunting humans for food was a rare sight, and usually happened with dragons that had health issues that prevented them from catching their normal prey.
As years passed and people improved their weapons, tools and means of defending their towns and cities, encounters between the two became less and less frequent. Before long, dragons were barely a threat to human communities. Instead, they became an actively hunted species, forcing them to retreat into wild and remote areas but still their numbers dwindled rapidly.
When dragons became a rarity and were thought to go extinct, laws were enacted to protect these majestic creatures and hunting became a punishable crime. However, this also caused dragon body parts to become highly valuable in black markets.
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It's not uncommon for illegal organizations to sell smaller dragons as pets and to use bigger ones (or ones that are overall more dangerous) as weapons.
(Also for all I know why not have the government in on this by taking its cut under the table and vigilantly looking in some other direction?) (And what are the chances that some stuff like Saints Row happens, huh?)
