By Roger Bate at Brownstone dot org.

Over the past few years, quiet but extraordinary warnings have emerged from the US Treasury Department. The Financial Crimes Enforcement Network reports that illicit e-cigarettes are being used as part of trade-based money-laundering schemes linked to fentanyl trafficking. Illegal vaping products are no longer just a regulatory nuisance or a youth-use talking point. They have become a financial instrument in the cartel economy.

The finding matters because it exposes a reality many policymakers have spent years denying—prohibition does not eliminate markets, it reorganizes them. And when demand persists, prohibition reliably hands control to the most ruthless and well-organized suppliers.

We are now watching that process unfold in real time in the US vaping market. And let's be clear where the blame lies: The CDC's Office on Smoking and Health and the FDA's Center for Tobacco Products have deliberately obscured relative risk and forced nicotine markets underground, where criminal supply now thrives beyond any meaningful oversight.

From Regulation to Underground Supply

Vaping emerged as a harm-reduction alternative for smokers. In the UK and New Zealand and other countries that allowed regulated products to compete openly with cigarettes, smoking rates declined rapidly.

In the United States, by contrast, legal vaping has been squeezed by a combination of bans, frozen approvals, and enforcement-first regulation. The result is not a smaller market. It is a market that has largely gone underground.

By the government's own admissions, only a small fraction of vaping products currently sold in the US are formally authorized. In practical terms, this means that most adults who vape are buying products that exist outside the legal framework, often without realizing it. In many local markets—especially convenience stores that I've personally investigated—illegal disposable vapes appear to make up the majority of sales.

This is not a fringe phenomenon. It is a parallel national supply chain.

What enforcement is actually finding

Recent enforcement actions give a sense of scale. Federal agencies have seized hundreds of thousands—and in some cases millions—of illegal vaping devices in single operations. Entire warehouses have been cleared of products that were never approved and were often deliberately mislabeled to evade customs scrutiny.

Authorities have acknowledged that thousands of distinct unauthorized vaping products are circulating in the US market. Most are manufactured overseas and enter the country through misdeclared shipping, freight forwarding, or informal cross-border routes. Once inside, distribution frequently overlaps with existing smuggling corridors linked to Mexico—routes long used for narcotics, weapons, and cash.

In several cases, vape shops raided by law enforcement turned out to be fronts for broader criminal activity, including drug distribution and money laundering. This is what happens when a consumer market is forced into the shadows: it is absorbed into criminal infrastructure that already knows how to move goods and money at scale.

Why Prohibition Fails—Every Time

None of this is surprising. Prohibition has a long and well-documented track record.

When governments criminalize supply while demand persists, they do not create safer markets. They create markets optimized for secrecy, intimidation, and profit maximization. Compliance-oriented firms exit. Criminal organizations enter. Oversight disappears.

This is not a failure of enforcement. It is the economic logic of prohibition.

Alcohol prohibition produced bootleg liquor, poisonings, and organized crime. The war on drugs professionalized trafficking and entrenched violent networks. High-tax cigarette regimes fueled smuggling and counterfeiting. Illicit vaping follows the same pattern, only faster.

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