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February 27, 2026
By Roger Bate
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.
The Danger of Illicit Products
One deeply uncomfortable consequence of this policy choice is now becoming harder to ignore: some illicit vaping products may be genuinely dangerous.
Devices of unknown origin may contain contaminants, inconsistent nicotine delivery, or poorly designed heating elements that generate toxic byproducts. Consumers have no reliable way to know what they are inhaling. There are no ingredient disclosures, no enforceable product standards, no recalls, and no liability.
When harms emerge, prohibition advocates predictably blame vaping itself. That conclusion reverses responsibility.
If an illicit vape injures someone, the fault does not lie with legal manufacturers who were barred from selling regulated products. It does not lie with compliant retailers shut out of the market. And it does not lie with consumers responding rationally to demand.
The responsibility lies with the policy decision that forced supply underground.
Regulatory Theater—and Real Victims
The current response—more raids, more seizures, more press conferences—does not address the underlying problem. It merely treats the symptoms.
Consumers know illegal vapes remain easy to find. Retailers face inconsistent and selective enforcement. Criminal networks adapt faster than regulators can respond. Each seizure is followed by replenishment through new channels.
This is not effective governance. It is regulatory theater with a massive human cost.
If unsafe illicit vaping products cause injuries or deaths, responsibility does not end with smugglers or foreign manufacturers. FDA and CDC officials who spent years demonizing harm reduction, blocking lawful products, and insisting on abstinence-only nicotine policy cannot plausibly claim clean hands.
They were warned. They were shown the incentives. They ignored the evidence.
When agencies deliberately eliminate regulated supply and then express shock that unregulated products fill the gap, they are not passive observers. They are participants. And when the foreseeable consequences include criminal enrichment and consumer harm, there is no moral distance to hide behind.
Owning the Consequences
FinCEN’s warnings should have forced a reckoning. Instead, they have been treated as an inconvenience.
But the lesson is unavoidable: prohibition does not protect public health from organized crime. It funds it. It empowers it. And it makes consumers less safe in the name of protecting them.
If illicit vaping products turn out to be dangerous, that fact does not vindicate prohibition. It indicts it. Dangerous underground markets are not evidence that harm reduction failed. They are evidence that regulation was abandoned.
And the harms that follow are not accidents. They are outcomes—ones that the FDA and CDC helped engineer, and for which they should be held accountable.
February 27, 2026
By Roger Bate
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.
The Danger of Illicit Products
One deeply uncomfortable consequence of this policy choice is now becoming harder to ignore: some illicit vaping products may be genuinely dangerous.
Devices of unknown origin may contain contaminants, inconsistent nicotine delivery, or poorly designed heating elements that generate toxic byproducts. Consumers have no reliable way to know what they are inhaling. There are no ingredient disclosures, no enforceable product standards, no recalls, and no liability.
When harms emerge, prohibition advocates predictably blame vaping itself. That conclusion reverses responsibility.
If an illicit vape injures someone, the fault does not lie with legal manufacturers who were barred from selling regulated products. It does not lie with compliant retailers shut out of the market. And it does not lie with consumers responding rationally to demand.
The responsibility lies with the policy decision that forced supply underground.
Regulatory Theater—and Real Victims
The current response—more raids, more seizures, more press conferences—does not address the underlying problem. It merely treats the symptoms.
Consumers know illegal vapes remain easy to find. Retailers face inconsistent and selective enforcement. Criminal networks adapt faster than regulators can respond. Each seizure is followed by replenishment through new channels.
This is not effective governance. It is regulatory theater with a massive human cost.
If unsafe illicit vaping products cause injuries or deaths, responsibility does not end with smugglers or foreign manufacturers. FDA and CDC officials who spent years demonizing harm reduction, blocking lawful products, and insisting on abstinence-only nicotine policy cannot plausibly claim clean hands.
They were warned. They were shown the incentives. They ignored the evidence.
When agencies deliberately eliminate regulated supply and then express shock that unregulated products fill the gap, they are not passive observers. They are participants. And when the foreseeable consequences include criminal enrichment and consumer harm, there is no moral distance to hide behind.
Owning the Consequences
FinCEN’s warnings should have forced a reckoning. Instead, they have been treated as an inconvenience.
But the lesson is unavoidable: prohibition does not protect public health from organized crime. It funds it. It empowers it. And it makes consumers less safe in the name of protecting them.
If illicit vaping products turn out to be dangerous, that fact does not vindicate prohibition. It indicts it. Dangerous underground markets are not evidence that harm reduction failed. They are evidence that regulation was abandoned.
And the harms that follow are not accidents. They are outcomes—ones that the FDA and CDC helped engineer, and for which they should be held accountable.
This article was published by Brownstone Institute
Roger Bate
Roger Bate is a Brownstone Fellow, Senior Fellow at the International Center for Law and Economics (Jan 2023-present), Board member of Africa Fighting Malaria (September 2000-present), and Fellow at the Institute of Economic Affairs (January 2000-present).
Roger Bate
Roger Bate is a Brownstone Fellow, Senior Fellow at the International Center for Law and Economics (Jan 2023-present), Board member of Africa Fighting Malaria (September 2000-present), and Fellow at the Institute of Economic Affairs (January 2000-present).
