@Sardonicus Technically, this question has a non-sarcastic answer, unlike jorts.
It would be the first. You have to remember that although lips are de-facto for smoking, the gills don't act sufficiently in this regard. Sure, the first would work if a fish actually had lips- but at the same time, if a fish were to smoke under water, it is likely to lose it hanging between it's gills than it's jaws as it swims forward or rubs up against other fish or seaweed.
@lucifargundam @geekyonion @Sardonicus Don't fish inhale through the mouth and exhale through the gills?
@lucifargundam @geekyonion @Sardonicus Something something puffer fish