The Food and Drug Administration regulations referred to in this story as pending, came out May 5. As expected, the rules require e-cigarette makers to put all products that came on the market after February 15, 2007, through an extremely costly, retroactive pre-market application process, that will likely put thousands of vaping entrepreneurs out of business. Companies have a two-year period to comply. The regulations also ban the sale of e-cigarettes to Americans under 18.

In the winter of 2008 Jan Verleur was living on the outskirts of Prague, working on a novel about three failed Internet entrepreneurs who invest their dwindling capital in an ecstasy-smuggling ring. It wasn't exactly autobiographical, but Verleur, now 36, was writing from experience with failed ventures. His most recent had been an ambitious pornography business that lost $22 million of investors' money, including $1.6 million of his own.

One day, as he was picking up a pack of smokes at a Vietnamese convenience store, he noticed a box of e-cigarettes. He tried one, and it leaked liquid into his mouth. "The technology wasn't ready for market," he says, "but the idea struck me as amazing." Soon after, Dan Recio, his buddy and colleague in the porn business, persuaded him to return to the U.S. and take another crack at making money by satisfying a different human craving.

The nascent e-cig market was wide open. Startup costs were low, and regulation was nonexistent. The potential payoff looked huge: Vaping seemed poised to grow into an enormous global market for a healthier product. Invented in 2003 by a Chinese pharmacist whose father had died of lung cancer, e-cigarettes use lithium-ion batteries to heat nicotine-laced liquid, turning it into a vapor that has only traces of some of the 60-plus carcinogens in cigarette smoke. At first Verleur and Recio's Miami-based company, VMR, looked to be riding a big, beautiful wave.

But the industry has shifted dramatically in the six years since Verleur and thousands of other entrepreneurs jumped in. Demand for e-cigs has turned out to be smaller than at first expected. It grew from virtually nothing a decade ago to an estimated $3.7 billion in the U.S. last year, according to ECigIntelligence, a British outfit that supplies information to the industry. But reports that sales in convenience stores and big retailers like Wal-Mart have started to contract, shrinking 6.2% in the 52 weeks that ended Mar. 26. Nielsen doesn't capture sales online or in America's 10,000 vape shops, but last year those channels were flat for VMR, which logged 2015 revenue of $50 million. All told, e-cig sales still pale in comparison with the $92 billion U.S. cigarette market.

Many smokers try e-cigs once and abandon them, disappointed that vapor doesn't taste or feel the same as real smoke in their mouths and throats and gives a slower nicotine hit. "There is a lot of trial and a lot of rejection," says tobacco analyst Vivien Azer, of Cowen and Company, in New York. "I'm not convinced the e-cigarette market will grow at all." Meanwhile the forces arrayed against the many little players trying to grab a piece of that smaller-than-expected pie are daunting. Vaping entrepreneurs are up against a three-headed monster--Big Tobacco, the Food & Drug Administration and an army of antismoking zealots--which is able and more than willing to wipe them out.

Tobacco giants like Reynolds and Altria have leveraged their fat balance sheets, huge sales forces and established distribution channels to enter the e-cig market and now own the top four brands in the U.S. Vaping cognoscenti say those are inferior devices that don't really threaten Big Tobacco's core product, traditional cigarettes (the tobacco companies insist they are committed to their cigarette alternatives).

tags:e-cigarettes, online ecigs store