Vape Shops Thrive Despite Recreational Ban

Recently, you may have noticed an increase 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 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 . 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 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 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 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 in Victoria alone.

Illicit vapes are a major contributor 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 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 on legitimate businesses through extortion, loss of sales, property damage and rising insurance premiums.

And tragically, at least one innocent bystander has been killed 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 and alcohol .

Around 1.5 million Australians vape - the overwhelming majority over the age of 18 .

Demand for nicotine is also persistent, with per capita consumption slowly trending upwards 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% 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 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 .

As with Prohibition, increasing penalties has not meaningfully disrupted 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 certainty of punishment is more effective than severity in deterring crime.

The enormous scale of the vaping market makes it a nightmare for law enforcement and other regulatory agencies. Again, the lesson of Prohibition is that once a black market is widely established, it is extremely difficult to eradicate, even when exponentially increasing tax dollars are diverted to bolster enforcement.

It is possible that a wide-scale, sustained law enforcement-led crackdown on illicit nicotine products could have an impact.

This type of operation, however, would require significantly greater resources than the $340 million the federal government has allocated to combating illicit nicotine supply.

It would also divert police resources away from other, arguably more pressing crime problems.

The unintended consequences of such a move would be to push the black market for vapes further underground, as we have seen with illicit drugs. Research shows that raising the risks associated with operating in a black market can also increase potential profits for organised crime groups and make it more violent .

There are also risks to consumers due to the proliferation of unregulated products. Illicit vapes have significantly higher levels of nicotine than those typically sold in regulated markets as well as, in rare cases, potentially lethal adulterants , such as synthetic opioids.

History has shown us time and again that efforts to prohibit popular drugs, often driven by best intentions to protect moral or physical safety, often create more harms.

Keeping everyone safer

Prohibition was eventually abandoned as a policy failure. This wasn't because it didn't reduce alcohol consumption - it did - but because it created a range of other more damaging social, health and economic harms .

Policy-makers have not heeded these historical cautionary tales from Prohibition or the more recent example of the war on drugs.

There are better alternatives. Regulated consumer markets for vapes exist in many Western countries. Government health departments in New Zealand and the United Kingdom , for example, actively promote vapes as a less harmful alternative to cigarettes.

Well-functioning legal markets divert people away from illicit ones, providing both safer products and fewer opportunities for organised crime.

The current landscape demands more creative, innovative solutions from our governments. We should expect more than a simple reboot of failed policies from the past.

The challenge is that politicians must first admit that current policy settings are not working. Then, they can seek broad-based expert input, plus the thoughts of nicotine consumers who are most affected by these policies, to create more viable, effective alternatives.

James Martin receives funding from the Department of Home Affairs for research into the national illicit nicotine market. He also has serves in an honorary, unpaid role as Tobacco Harm Reduction Advisor to Harm Reduction Australia.

David Bright has received funding from the Department of Home Affairs, the Australian Research Council, the Australian Institute of Criminology, and the National Intelligence and Security Discovery Research Grants program.