How bad has the illicit vapor problem become? In March, the National Association of Convenience Stores (NACS) put the issue front and center during its Day on the Hill, estimating that roughly 80% of the current vape market consists of illegal flavored products.
“We made it a big issue at Day on the Hill because we've really reached a tipping point where dramatic action is needed quickly,” said Doug Kantor, general counsel for NACS.
While gray-market vapes are costing responsible retailers millions annually, they also serve as a stark warning: When government attempts to ban products with clear consumer demand and without a workable enforcement plan, illicit markets rush in to fill the void. It’s a scenario retailers fear could play out across other emerging behind-the-counter categories, including kratom and hemp-derived THC products.
“Vape tells a larger story,” Kantor said. “We know prohibition has been a failed policy, whereas responsible regulations can work well.”
Here’s a look at the most pressing nicotine issues at the federal and state levels, what’s ahead for emerging categories and how retailers can engage.
Federal nicotine: The battle to undo illicit vapes
With Republicans—who have historically taken a lighter regulatory approach to nicotine—controlling all three branches of government, retailers have been able to shift from defense to offense. Rather than fighting new excise taxes, menthol bans or nicotine caps, the focus has turned to fixing a broken marketplace.
At the center of that effort: an illicit flavored vapor market that has flourished since the U.S. Food and Drug Administration (FDA) first restricted flavors in early 2020.
“The illicit market on nicotine products has grown out of control,” said Kantor. “This level of lawlessness is no good for anybody, and it's certainly not good for legitimate businesses trying to do the right thing.”
The scale of the issue isn’t just about enforcement: it’s also about confusion. According to David Spross, executive director of the National Association of Tobacco Outlets (NATO), retailers are often left guessing which products are legal.
Although the FDA’s Center for Tobacco Products (CTP) has published a list of 45 marketing granted orders (MGOs) for vapor products as of May 2026, hundreds of applications remain pending. Complicating matters further, some products initially denied authorization are still on shelves due to court rulings requiring the FDA to re-review applications—yet the agency has not disclosed which products those are.
“Especially for the retail community, continued transparency and information from the Center for Tobacco Products is critical,” Spross said.
There has been some progress. E-cigarette maker Juul received marketing authorization last summer after an earlier denial, and other product approvals—including the first for a non-major tobacco company—have followed. Federal enforcement has also ticked up, with the FDA and U.S. Customs and Border Protection (CBP) seizing millions of illegal vapor products.
Still, those wins barely scratch the surface.
Of the 45 authorized vapor products, only a handful are menthol—and until May, the FDA had not approved a single non-menthol flavor. That changed on May 5, when the agency issued marketing granted orders to two flavored products from Glas vapor: its Gold (mango) and Sapphire (blueberry) products, marking a decisive departure from a previous unspoken “no fruit flavors” policy. Of note, the Glas products leverage technology that requires the user to scan their ID every time they use the devices to ensure only adults ages 21 and over have access.
“The recent FDA marketing granted for flavored vapor products is a positive step in providing retailers the opportunity to offer a broader range of options to adults smokers who wish to switch away from combustible products,” said Spross.
Those two legal flavors—that require additional steps for consumers to use—are competing with thousands of unapproved flavored products that remain available. That imbalance has helped sustain strong consumer demand for products that are, technically, illegal.
“The whole market needs regulatory clarity,” Kantor said. “It's long overdue.”
Stakeholders point to three critical steps needed to rein in illicit vapor:
1. More product authorizations: The FDA continues to face a massive backlog of applications, including vapor and nicotine pouches. Even among the 45 authorized products, some have already exited the market due to lack of sales. “There's just not enough ‘authorized vapor products’ that are available,” Spross said.
2. Greater transparency on legal products: Without a comprehensive, up-to-date list of authorized, pending and court-reviewed products, retailers face an impossible compliance challenge. “Having that information is critical for retail,” Spross said.
3. Stronger, sustained enforcement: While federal agencies intercepted roughly 6 million illicit vapor products last year, that number represents only a fraction of the total market. Spross acknowledges the increased activity but emphasized the need for consistency: “Enforcement needs to continue with that stepped-up level.”
And vapor may not be the only category at risk. Kantor notes early warning signs in nicotine pouches, another fast-growing segment facing regulatory delays.
“There is some of the same concern that regulators have not done a great job giving clarity, and some of this illicit problem is creeping into that pouch market,” he said.
For retailers, advocacy remains essential. Maintaining ongoing dialogue with lawmakers and regulators—especially through efforts like NACS Day on the Hill—can help push for clearer rules and better enforcement.
“It is helpful to have a running dialogue with regulators, both about the difficulty to comply and about whatever level of help and guidance those regulators are able and willing to provide,” Kantor said.
State-level nicotine: A rare calm
After a flurry of activity in recent years, 2026 is shaping up to be relatively quiet at the state level.
According to NATO, both tax and regulatory proposals are expected to decline—due in part to election-year politics.
“There's always going to be a handful of states that try to look at it,” Spross said. “But it's not to the volume that we saw last year.”
Where tax proposals do emerge, they tend to focus on states that have yet to implement taxes on vapor or nicotine pouches. In many cases, those proposals seek to align taxes with traditional cigarettes or other tobacco products, a move NATO opposes.
“Those products—based on the early science—don't have the same risk as cigarettes,” Spross said. “They shouldn't be taxed the same.”
One notable trend that continues to gain traction is the adoption of state-level vapor directory laws. These laws aim to do what the FDA has not: clearly define which products are legal to sell within a state.
As of press time, 16 states have enacted such laws.
NATO has taken a neutral stance, largely because the effectiveness of these directories depends on enforcement.
“Now that we're two or three years into this for some states, I’d like to see what is actually happening with the illicit market,” Spross said. “Are states enforcing against the directory?”
The next phase, he suggested, will be determining whether these policies meaningfully reduce illicit trade.
Hemp: The federal ban looms
If vapor represents a cautionary tale, hemp-derived THC may be next.
According to cannabis data firm BDSA, intoxicating hemp products generated $21.8 billion in sales last year. Yet despite that growth, the category faces an existential threat.
A provision included in last year’s federal spending bill redefined legal hemp to contain no more than 0.4 mg of THC per package—a threshold so low it would effectively eliminate most hemp-derived THC products, along with many full-spectrum CBD items.
The policy includes a one-year grace period, meaning enforcement is set to begin Nov. 12.
So far, efforts to revise the rule or simply delay implementation have stalled.
“Unfortunately, we're kind of in the same spot, but we've seen continued interest in regulating hemp versus banning it, whether through bill amendments, standalone extension requests and bills, even Tweets,” said Diana Eberlein, chair of the Coalition for Adult Beverage Alternatives (CABA). “We are still looking for the vehicle where we will correct that definition so that it can provide for not only non-intoxicating therapeutic products, but also the low-dose THC beverage side.”
Eberlein warned that the path forward is complicated. Competing industry interests, legislative gridlock and election-year dynamics have all slowed progress.
“We are likely looking at a photo finish in terms of getting change done before November,” she said.
Despite the challenges, there are signs of momentum.
A broad coalition is forming that includes hemp producers, alcohol industry groups such as the Wine and Spirit Wholesalers of America (WSWA) and retail organizations like NACS.
“All you're going to do if you ban these products is drive them underground where you lose any ability to regulate,” said Jon Taets, NACS’ director of government relations. “Our position is that we want regulatory clarity.”
Another key factor: federal support for CBD access. A pilot program through the Centers for Medicare & Medicaid Services (CMS) allows seniors to be reimbursed for hemp-derived CBD products—products that would become illegal under the current rule.
President Donald Trump has publicly urged Congress to fix the issue, calling for an updated THC threshold that preserves access to full-spectrum CBD while maintaining safeguards.
For retailers, the immediate priority should be alerting their consumers.
“The No. 1 thing is awareness,” Eberlein said. “Because the products remain on shelves, people assume the problem's been fixed.”
She pointed to grassroots efforts like the WSWA’s “Save Hemp Bevs” campaign, which provides tools for consumers to contact lawmakers directly—and for retailers to promote it.
“The call to action's very simple,” she said. “You want these products to remain on shelves? Make sure Congress has heard that this can be regulated like alcohol.”
And convenience stores, she added, are uniquely positioned to drive that message.
“Not everyone goes to a liquor store—but most people fill up their gas tank,” she said.
Kratom: Separating natural from synthetic
Kratom presents a similar regulatory challenge—one increasingly defined by the need to distinguish between traditional plant-based products and newer, more potent derivatives.
The FDA currently maintains on its website that kratom is not lawfully marketed in the U.S. due to insufficient safety data. Yet enforcement has been limited, allowing the market to grow.
In that vacuum, a more concentrated compound—7-hydroxymitragynine (7-OH)—has emerged.
Mac Haddow, senior fellow on public policy for the American Kratom Association, emphasizes that the distinction is critical.
“The natural plant has no detectable 7-OH in it,” he said.
Dr. Mitchell Naficy, a physician who specializes in substance abuse and rehabilitation, further outlined the differences between natural kratom and 7-OH in a blog for the San Diego Wellness Center.
“The truth is that kratom and 7-OH are connected but very different in how they affect the human body: one is a plant with a variety of natural compounds, the other is a specific metabolite that carries far more intense and addictive effects,” he said. “One of the most important reasons to separate kratom from 7-OH is addiction potential. Kratom itself can be habit-forming, but the presence of 7-OH dramatically raises the stakes.”
Regulators appear to agree. In July, the FDA recommended classifying 7-OH as a controlled substance.
“The FDA is specifically targeting 7-OH, a concentrated byproduct of the kratom plant,” an FDA press release elaborated. “It is not focused on natural kratom leaf products.”
At the state level, approaches vary widely. Some states have opted for full bans, while others have enacted regulations such as the Kratom Consumer Protection Act, which limits 7-OH concentrations.
As of press time:
- 12 states have banned 7-OH.
- Several others have imposed strict limits on 7-OH.
- Six states and Washington, D.C., have banned kratom entirely.
- Rhode Island reversed its total kratom ban in July 2025.
“We're winning the battle on regulation versus bans,” Haddow said.
As with other categories, industry groups are pushing for clearer, more consistent rules.
“You need to differentiate the products that are following the law from those that are not,” Kantor said of kratom and 7-OH. “Our hope is that brings an orderly process to this part of the market.”
The bigger picture: Regulation vs. restriction
Across nicotine, hemp and kratom, a consistent theme emerges: Unclear rules and restrictive policies tend to fuel illicit markets, while thoughtful regulation supports compliance and consumer safety.
For convenience retailers, the stakes go beyond any single category.
Too often, policymakers default to limiting sales to specialty retailers—despite evidence that convenience stores perform as well or better when it comes to age verification.
“We need to be clear here about what actually works versus what sounds good,” Kantor said. “Vape shops are verifiably far worse at checking people's age and complying with the law than convenience stores are, and it's not close.”
The industry’s argument is straightforward: responsible retailers can and should be part of the solution, maintaining access for adults to safely purchase age-restricted products and keeping them out of the hands of minors.
What doesn’t work, stakeholders say, are blanket bans that ignore consumer demand and create opportunities for illicit operators. What does work is a balanced approach: clear rules, consistent enforcement and collaboration between regulators and retailers.
“It is much better for everyone involved—and certainly for protecting consumers—to get out there early with a sound regulatory regime,” Kantor said. “And then, we need to really follow it.”
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