"Its leaves can be dried, ground and rolled into cigarets [sic], which are bootlegged under the name of 'muggles,' 'reefers,' or 'Mary Warners,'" reads a 1931 Time magazine article about a plant called "cannabis" that was becoming more and more popular at the time.
Apparently, long before "muggle" referred to non-magical folk in our literary lexicon, it was slang for dangerous, dangerous marijuana cigarettes.
Shame, shame, shame.
Several dictionaries The Huffington Post found, including Slang: The Topical Dictionary Of Americanisms, Cassell's Dictionary Of Slang and The Complete Drug Slang Dictionary, corroborate Time's claim. (They also list a bunch of other fun words and phrases like "monkey," which is a "cigarette made from cocaine paste and tobacco," and "Meg," "Megg" and "Meggie," which are all slang for pot in some form or another.)
Muggle's exact origin remains unknown, although the Online Etymology Dictionary places its birth around 1926. It jumped into the Oxford English Dictionary in 1938 along with "muggler," or "a marijuana smoker." Similarly, "muggle-head" was apparently the equivalent of "pothead" -- a person who smoked muggles. Which sounds super weird if you can't help but think of a muggle as a human being, blissfully ignorant of their lack of magical blood.
Supposedly, J.K. Rowling didn't know about the word's druggie past, though. In a 2004 interview, she explained how she was looking for something that suggested "both foolishness and lovability."
"The word 'mug' came to mind for somebody gullible, and then I softened it," Rowling said. "I think 'muggle' sounds quite cuddly. I didn't know that the word 'muggle' had been used as drug slang at that point. Ah, well." It's all muggle madness.
We don't know what is happening here.