This is the first study to examine the nature of the genetic and environmental association between the liability to affiliate with deviant peers and cannabis use. Our prediction was that part of the genetic risk for CU would be mediated through selection into deviant peer groups. Although there was a significant genetic contribution in the PGD-CU association we found no evidence that genetic or environmental risks in PGD increase or mediate the risk of cannabis use. Instead, our results support the hypothesis that the association arises because of a causal pathway from CU to PGD. Between the ages 15 and 25 years, CU explained between one half and three quarters of the genetic variance in PGD. Although declining over time, large proportions of the shared environmental variance in PGD were likewise attributable to CU. CU can therefore be understood as the “risk indicator” for the liability to affiliate with deviant peers because it appears to sit in the causal pathway between genetic and environmental risks on the one hand and the expression of PGD on the other.