If recreational vapes are banned, why are there still vape shops everywhere?

Recently, you may have noticed an increase^[1] in the number of shops selling tobacco in your area. Alongside cigarettes, these shops often sell vapes.

In July 2024, the federal government banned the sale^[2] of recreational vapes nationwide. The only way to get one legally is from a pharmacist. Some states also require a doctor’s prescription.

So why, then, more than a year on, are these stores still selling vapes, in broad daylight?

In short: it’s because restrictions on the supply of legal nicotine have created a black market so big that it’s grown beyond the capacity of regulators to effectively suppress.

Billions going underground

To better understand the demand for vapes, it’s useful to draw on a close historical parallel: alcohol prohibition in the United States.

In the 1920s, Prohibition did not stop the sale of alcohol, but instead created a thriving black market^[3]. Illicit alcohol was easy to obtain, and organised crime groups engaged in violent conflict over territory and market share.

A century later, evidence is mounting^[4] that Australia’s nicotine policy – now the most restrictive in the world – has similarly driven the expansion of a black market.

Just as Al Capone and his cronies were the main beneficiaries of Prohibition, billions of dollars^[5] are currently flowing into the pockets of organised crime groups who use that money to fund other serious criminal activity.

Just this week, the Therapeutic Goods Administration (TGA) seized^[6] more than A$40,000 of illegal vapes from a single retail outlet in the Melbourne CBD. It’s a drop in the ocean of a market estimated to be worth up to half a billion dollars^[7] in Victoria alone.

Illicit vapes are a major contributor^[8] to the “tobacco wars”: a violent, ongoing conflict between rival organised crime groups for control of Australia’s illicit nicotine market.

The huge profits to be made inevitably creates competition, which fuels violence, with more than 230 firebombings^[9] linked to the illicit tobacco trade, and a growing number of kidnappings, robberies and assaults since January 2023.

This conflict doesn’t just affect gangsters. There are significant impacts^[10] on legitimate businesses through extortion, loss of sales, property damage and rising insurance premiums.

And tragically, at least one innocent bystander has been killed^[11] by the so-called tobacco wars.

Persistently high demand

As with alcohol prohibition, the illicit market for vapes is sustained by strong demand.

Nicotine is the third most popular recreational drug in the country, after caffeine^[12] and alcohol^[13].

Around 1.5 million Australians vape^[14] – the overwhelming majority over the age of 18^[15].

Demand for nicotine is also persistent, with per capita consumption slowly trending upwards^[16] nationally since 2016.

Another part of the problem has been the failure of the government’s model for supplying “medicinal” vapes. (Intriguingly, alcohol was also available via prescription during Prohibition).

It failed because consumer demand for medicinal vapes is very low. More than 95%^[17] of people who vape source their products from the black market. This is likely due, in part, to bans on popular flavours, which adults prefer^[18] to the tobacco and menthol options available legally.

The enforcement problem

In response to the growth of the nicotine black market, state and federal governments have legislated increased penalties, which include up to seven years imprisonment and fines of more than $21 million^[19].

As with Prohibition, increasing penalties has not meaningfully disrupted^[20] the demand and supply of illicit vapes.

Counter-intuitively, these laws actually help organised crime by creating economic opportunities that would otherwise be fulfilled by legal businesses.

Legislating penalties is easy. Actual enforcement is hard. Enforcement is also more important, with research showing^[21] certainty of punishment is more effective than severity in deterring crime.