illegality does not necessarily breed violence. the relationship between illicit markets and violence depends on institutions of protection. when state-sponsored protection rackets form, illicit markets can be peaceful. conversely, the breakdown of state-sponsored protection rackets, which may result from well-meaning policy reforms intended to reduce corruption and improve law enforcement, can lead to violence. the cases of drug trafficking in contemporary mexico and colombia show how a focus on the emergence and breakdown of state-sponsored protection rackets helps explain variation in levels of violence both within and across illicit markets.