Shedding Light on the Dark: The Impact of Legal Enforcement on Darknet Transactions

Abstract

Practice and Policy-Oriented Abstract Law enforcement bodies have largely responded to the increase in darknet activities through site shutdowns, which involve significant investment of policing resources. Despite these efforts, new darknet sites continue to show up after the site takedowns. We offer a new look at this issue by assessing the viability of selectively targeting large drug vendors operating on darknet sites. We find that the arrest of a major drug vendor reduced subsequent transaction levels by 39% and the number of remaining vendors by 56% on Silk Road 2.0. This deterrent effect also spilled over to drug vendors located in countries beyond the prosecutorial jurisdiction of the arrested vendor. We further find that small darknet drug vendors were most deterred by the arrest and vendors selling dangerous drugs were relatively more deterred. Our study findings hold policy-relevant implications to government agencies and law enforcement. Whereas site shutdowns can disrupt these markets momentarily, the selective targeting of large-scale drug vendors should be given serious consideration and used to a broader extent. The design of future enforcement strategies should also account for the finding that darknet markets are made up of both small-scale drug dealers new to the drug trade and large-scale drug syndicates.