Why do gangs proliferate during democratization and decline in number during authoritarian consolidation? I utilize primary evidence of two Indonesian gangs to inform a model of protection gangs under varying states of political development. Modeling gangs as territorial firms under different regulatory conditions, I attribute their number and political affiliation to the interaction between state capacity and political fragmentation. In weak states, gangs will lack political affiliations and their number will be determined by the scalability of their coercive capacities. In countries where states have the capacity to significantly constrain gangs, but lack significant costs for politicians to associate with them, gangs will seek political affiliation, trading coercive services for lax law enforcement. In such contexts, their number will be determined by state factionalization. Thus, gangs proliferate during democratization due to more political actors sharing state control. I assess the theory examining Indonesia’s history of statebuilding and political transition.