To cut a drug(esp. cocaine) means to dilute the drug to increase its weight and make more profit.
John was cutting coke by mixing 4 grams of it with 1 gram of baking soda and sold it as 5 grams of cocaine.
Using an object (usually a credit card or bank card) to separate cocaine into lines to snort.
Felicity was cutting coke with her American Express card in the club bathroom.